The Petitioners request a rulemaking to establish standards of conduct governing relationships between California’s natural gas local distribution companies and electric
utilities and their affiliated, unregulated marketing entities. They argue that existing rules do not provide a sufficient safeguard from affiliate abuses, which they assert are already occurring. They also argue that significant changes in the California marketplace create the need for enforceable, standardized rules. The Petitioners state that the purpose of such rules is "to facilitate healthy and fair market competition with all players on equal footing." (Motion, p. 4.)
The Petitioners request the Commission act quickly to establish these rules. They see a serious threat to competition in the creation of numerous affiliated marketing entities at a time when swift change is occurring in the market.
Most of the responding parties support the establishment of a rulemaking, but differ on some of the particulars of scope and timing. PG&E, for example, argues that the Commission already has a substantial workload associated with implementing direct access on January 1, 1998, which must take precedence over the requested rulemaking. With respect to scope, SCG and Edison are among a number of parties who assert that the rulemaking should be limited to developing standards of conduct only for gas and electric power marketing affiliates, and not all (nonenergy) affiliated marketing entities. PG&E, in contrast, suggests that consolidating all existing standards for affiliate transactions in one order through a rulemaking process may be useful. Edison argues that the Commission should concurrently institute a rulemaking and investigation to clearly preserve the opportunity for hearings if needed or requested.
The CEC and Vantus do not agree that a separate rulemaking is warranted. Rather, Vantus argues that the Commission currently has in place effective rules and policies governing the relationship between energy utilities and their affiliated marketers operating in unregulated markets. The CEC advocates the Commission direct a stakeholder working group to develop utility-affiliate rules. These rules could result in regulations, or voluntary industry guidelines and other forms of self-regulation.
We have already expressed our interest in reviewing our affiliate transaction rules to determine whether they must be modified given potential self-dealing and cross-subsidization issues that may arise as a result of electric utility restructuring. [ See, for example, our Updated Roadmap Decision (D.) 96-12-088, slip op. p. 2. ] At present, the affiliate transaction rules which apply to the energy utilities vary somewhat. Aside from the Reporting Requirements for Utility-Affiliate Transactions, rules governing utility relations with affiliates have been developed in a number of dockets, largely as a result of corporate restructurings, but also as a result of competition being introduced into market segments like natural gas procurement. [ Reporting Requirements for Utility-Affiliate Transactions were adopted in D.93-02-019 (48 CPUC 2d 163, 178). Decisions governing energy company corporate restructurings which address affiliate transactions include our decision on SDG&E’s reorganization, D.95-12-018; the Edison holding company decision (D.88-01-063, 27 CPUC 2d 347, 375, 383); the PG&E holding company decision (D.96-11-017). The final rules for utility gas marketing affiliates can be found in D.91-02-022, 39 CPUC 2d 321, 324, 332.] Recrafting the rules which apply only to energy utilities and their energy affiliates, where appropriate, to address the market interactions that may occur in the restructured energy market makes sense. To do so, we should extend the scope of the rules to cover affiliates which provide energy-related services as well. Utility entities competing to provide energy services should face uniform rules so that no advantage or disadvantage accrues to a player simply because of differing regulations. Both electric and gas utilities and affiliates may market services and interact in the marketplace in a manner not anticipated under our present gas marketing affiliate rules. Developing new rules or modifying existing rules for both gas and electric transactions should be undertaken.
A rulemaking is the appropriate procedural venue for rules development and revision. With a formal docket open, parties have a ready forum to address the Commission on this issue. We agree with Edison that instituting an investigation concurrent with the rulemaking is appropriate.