Opinion ID: 726753
Heading Depth: 4
Heading Rank: 2

Heading: cpuc6

Text: 19
20 The first significant CPUC decision to focus on the role of utilities in the NGV market is a July 1991 decision approving an application by Pacific Gas & Electric Company (PG & E) to establish an NGV program. Re Pacific Gas and Elec. Co., 40 C.P.U.C.2d 722, 1991 WL 501752 (Cal.P.U.C.1991) (hereinafter PG & E ), modified on denial of reh'g, 41 C.P.U.C.2d 428, 1991 WL 552570 (Cal.P.U.C.1991). The PG & E decision is relevant to this case not merely because of the similarity of subject matter but because the commission expressly adopted the policy positions expressed in this opinion when, less than six months later, it approved SoCalGas' application to establish an NGV program. Re Southern California Gas Co., 43 C.P.U.C.2d 104, 110, 1992 WL 584042 (Cal.P.U.C.1992) (We intend that the policy issues decided in [PG & E ] apply to SoCalGas.). 21 As an initial matter, the commission found that because of consumer indifference, the low cost of gasoline, the lack of oil company participation, and the lack of financial incentives, the chance of a natural gas fueled vehicle industry surviving and growing without some form of initial public assistance is practically nil. 40 C.P.U.C.2d at 734. The commission approved utility involvement in the NGV market as just the kind of assistance necessary for the industry to survive and grow: 22 In funding the utility for a two-year period we are trying to promote the development of the equipment and infrastructure needed to facilitate the use of natural gas as a vehicle fuel. Utilities play a critical role in the development of this market; but the role, though critical, should be temporary. However, we are not prepared to set a timetable for the extrication of the utilities from the market because it is not clear how long their presence will be needed to provide the bridge to a profitable competitive market for retail CNG. 23 Id. at 742. As the commission put it in a later order on the subject, [t]he utilities are called upon to 'jump start' the retail market by providing refueling stations and offering conversion incentives. Re Utility Involvement in the Market for Low-Emission Vehicles, Interim Order 91-10-029 (Cal.P.U.C. Oct. 23, 1991), 1991 WL 496693 at  8. Therefore, the commission approved the utilities' proposals to spend millions of dollars on NGV programs--programs that included the construction of NGV fueling stations--and to charge the costs to ratepayers. PG & E, 40 C.P.U.C.2d at 745 (authorizing PG & E to spend $12,485,000); Re Southern California Gas, 43 C.P.U.C.2d at 113 (authorizing SoCalGas to spend $10,818,000); Re San Diego Gas & Electric Co., 40 C.P.U.C.2d 713, 1991 WL 521000 (Cal.P.U.C.1991) (authorizing SDG & E to spend $6,761,000), modified on denial of reh'g, 41 C.P.U.C.2d 428, 1991 WL 531200 (Cal.P.U.C.1991). 24 In making its decision, the commission expressly considered the possible effects of utility participation in the NGV market on competition: 25 The record is clear, and we find, that PG & E's NGV program is not anticompetitive. There are no competitors now, and potential competitors, if there are any, are waiting for PG & E to show them the way through the investment of PG & E's and ratepayers' funds.... [T]he short answer to [those] who fear competition from PG & E, is that there is no competition. PG & E is in this market by default. No one wants to compete. 26 40 C.P.U.C.2d at 742. Thus, the CPUC reconciled the legislature's two goals of utility participation and fair competition in the NGV-infrastructure market by clearly articulating a policy of allowing ratepayer-funded utility participation in the market because no nonutility enterprises with whom the utilities might unfairly compete were in that market. 27 The commission, however, expressed its intent to monitor closely the impact of utility participation in the market on the growth of competition: 28 As competition in the NGV market emerges and evolves, the Commission will be in a position to adjust the PG & E program, as necessary, in response. PG & E will be subject to ongoing reasonableness reviews. In addition, PG & E's entire NGV program will be subject to review should PG & E apply to continue the program beyond its two-year term. PG & E has also agreed to submit periodic reports to the Commission. The Commission will have ample opportunity to review the competitive situation and make mid-course corrections as necessary. 29 Id. Thus, the CPUC clearly articulated its continuing responsibility for balancing the legislative goals of utility participation in the NGV market and fair competition in that market. 30
31 After approving PG & E's application, the CPUC on its own initiative opened an investigation and rulemaking proceeding concerning utility involvement in the market for low-emission vehicles, including NGVs. Re Utility Involvement in the Market for Low-Emission Vehicles, Interim Order 91-10-029 (Cal.P.U.C. Oct. 23, 1991), 1991 WL 496693. 32 In initiating the proceeding, the CPUC reiterated its view of the role of utilities in the development of an NGV infrastructure: Initially, the utilities must play a role in ensuring that natural gas is transported to the pumps [and] that there are natural gas refueling stations conveniently located to serve the public ... Id. 33 at  5. One purpose of the proceeding was to develop policies on how long a utility presence will be needed to provide the bridge to a profitable competitive market for retail CNG. Id. at  7. The proceeding also provided an opportunity to define more specifically what NGV activities, if any, are appropriate for long-term funding, and what measures the Commission should use to assess possible anti-competitive effects of the utilities' activities. Id. at  5. 34 Phase I of the investigation and rulemaking concluded with the adoption of policy guidelines by the CPUC in July 1993. Re Utility Involvement in the Market for Low-emission Vehicles, 145 P.U.R.4th 243, 1993 WL 773480 (Cal.P.U.C.1993). While acknowledging that [i]nvestor owned gas ... utilities have an appropriate and prominent place in seeking to introduce the technology of vehicles ... fueled by compressed natural gas and the development of a service and refueling infrastructure, the commission reiterated that [t]he activities of such entities are not to be undertaken to the exclusion of other non-utility entrants, and it is the responsibility of the Commission to see that utility presence is compatible with the emergence of competition in all sectors of this industry. Id. at 248. The CPUC therefore adopted the following guideline for its use in the approval of new and continuing [low-emission-vehicle] programs: The utility will be required to demonstrate that each element of its [low-emission-vehicle] program is not unfairly competitive with nonutility enterprises, and to discontinue the offending program element if, and when, it interferes with the development of a competitive market. Id. at 252-53. 35 In the guidelines, the CPUC departed significantly from the position that it had taken in its earlier decisions on how to implement the legislative directive to prevent unfair utility competition in the NGV market. No longer was the CPUC willing to say, as it had in PG & E, that utility involvement in the market would have no anti-competitive effect because no competition existed in the market; indeed, it instead made a factual finding that [t]he preclusion of unfair competition governs markets where there currently is no competition as well as those where there currently is. Id. at 255. Furthermore, in adopting the guideline on competition, the commission stated, The terms of this guideline supports [sic] and is [sic] obviously subordinate to both state and federal statutes dealing with anti-competitive behavior. Id. at 252. Thus, in July 1993, the commission articulated a new state policy on the balancing of the legislative goals of utility participation and fair competition: even if the NGV-infrastructure market contained no nonutility competitors, the utilities must compete fairly, which meant, at least, conforming to state and federal competition laws. 36 Upon issuing the guidelines, the CPUC announced that the utility NGV programs it had previously approved had to be brought into conformity with the guidelines. Id. at 246. It also ordered the utilities to submit new applications for six-year NGV programs. Id. at 256. 37
38 In November 1995, several months after the district court's dismissal of Cal CNG's complaint, the CPUC concluded Phase II of its investigation and rulemaking and issued an order partially approving the applications that the utilities, including SoCalGas, had submitted in response to the issuance of the 1993 guidelines at the completion of Phase I. 7 Re Utility Involvement in the Market for Low-Emission Vehicles, 165 P.U.R.4th 503, 1995 WL 768974 (Cal.P.U.C.1995). SoCalGas's application had included a proposal to use ratepayer funds to construct at least 67 additional NGV fueling stations for the use of its customers. Id. at 545. The CPUC did not approve that portion of SoCalGas's application, finding that the risk that the ratepayers would never recover any of the funds used for such construction was too great. Id. at 545-47. Because the CPUC rejected this portion of SoCalGas's application, it did not fully address the unfair-competition concerns that other parties had raised in the proceeding. The commission did state, however, that [t]here are many companies that are interested in competing in the market for the construction and operation of refueling stations at customer or other private sites and that [a]ny future utility refueling station program must be designed to avoid giving the utility any market advantage, based on its monopoly status. Id. at 547. That meant, the commission concluded, that construction, operation, and commodity charges must be fully compensatory. Id. In other words, no ratepayer funds could be used to subsidize the utility's costs of fueling stations or the price it charged purchasers of such stations. The legislative goals had been rebalanced again, and state policy had changed as a consequence: the need for fair competition in the NGV-infrastructure market now completely prevented utilities from using ratepayer funds to construct and maintain NGV fueling stations. 39