BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Rulemaking on the Commission’s Own Motion toAssess and Revise the Regulatory Structure Governing California’s Natural Gas Industry.
	
Rulemaking 98-01-011
(Filed January 21, 1998)

ADMINISTRATIVE LAW JUDGE’S RULING
PRIOR TO NOVEMBER 4, 1998 PREHEARING CONFERENCE

In Decision (D.) 98-10-028, the Commission announced its intention to hold hearings on “many of the factual issues raised” in the Market Conditions Reports (filed in this docket on July 15, 1998) and in the rebuttal to those reports (filed in this docket on September 1, 1998).  In addition, the Commission sought evidence on “anticipated labor impacts of the various restructuring proposals that have been raised in this proceeding.”  The Commission directed me to hold a prehearing conference in San Francisco on November 4, 1998, at 11:00 a.m., to discuss the format and schedule for evidentiary hearings.
My purpose in issuing this ruling is to inform parties of the direction we are intending to take in these hearings, in order to assist parties as they prepare for the prehearing conference.  At the prehearing conference, I also hope to firm up scheduling and other procedural details related to the evidentiary hearings and to receive all comments relevant to the scope of this portion of the proceeding.
Through these hearings, the Commission will receive the Market Conditions Reports and the rebuttal of these reports into evidence.  Toward that end, I anticipate that some parties may want to cross-examine the witnesses sponsoring various portions of the reports and rebuttal.  For reasons I will explain below, I hope that any such cross-examination will be very limited.  In the reports and rebuttal, parties focused on aspects of the current market structure that demonstrate actual instances of, or potential for anti-competitive or discriminatory conduct.  Through the hearing process, the assigned commissioners and I will seek to understand the implications of the evidence offered in the reports and rebuttal for the future functioning of the natural gas market in California, as well as appropriate regulatory responses.  In other words, is there a problem that requires a change to the market structure or some other regulatory change, and if so, what should those changes be?
Hearing Panels
In order to stimulate a productive interchange on these topics, we will receive evidence through a number of subject-oriented panels.  The panelists will be those witnesses who have offered, through pre-filed reports or rebuttal, evidence that relates directly to the subject of the panel.  Each member of the panel will be given five minutes to summarize the position which he or she is taking on the relevant subject, and the assigned commissioners and I will then direct an interchange among the parties.  We hope, through this process, to provide a more thorough understanding of problems and solutions and to avoid the need for some or much of the detailed cross-examination that might otherwise occur.  However, we will provide time for “clean-up” cross-examination where it is needed.
Market Conditions Panels
Based on our review of the reports and rebuttal and of the various motions requesting evidentiary hearings, we have identified several topics, with each numbered item representing a different panel.  In answering the questions posed to each panel, witnesses will be allowed to rely only on the examples raised in the Market Conditions Reports and rebuttal.  At issue is whether or not those examples are symptomatic of a broader problem.
1.  Hub Services
Do the pricing and availability of hub services provide discriminatory or anti-competitive opportunities?  If so, what changes need be undertaken?
Related Market Conditions Reports and Rebuttal Issues:
•	  Has SoCalGas controlled access to parking services in a discriminatory way?

•	  Has flexibility in the pricing of hub services enabled local distribution companies to unduly discriminate against shippers to the advantage of their own affiliates?

•	  Do hub services marketers have access to utility information that would influence them or give them an advantage in negotiating deals with customers?

Parties Providing Testimony:
•	  Edison
•	  SoCalGas
•	  PG&E
•	  Calpine
•	  ORA

2.  Gas Storage and the Integrated Utility
Are there aspects of the relationship between the integrated utilities and the storage function that provide incentives and opportunities for anti-competitive activity?  If so, what changes should be undertaken?
Related Market Conditions Report and Rebuttal Issues:
•	  Information available to other departments?
•	  Has SoCalGas discriminated against shippers in favor of its own affiliates?

•	  How does access to information about the availability of storage capacity affect a shipper’s ability to gain non-discriminatory access to storage?

•	  Is information related to the utilities' gas storage role available or accessible to other internal gas utility departments?

•	  Does joint ownership of transmission and storage create opportunities for anti-competitive behavior?

Parties Providing Testimony:

•	  Edison
•	  SoCalGas
•	  PG&E
•	  Wild Goose

3.  Balancing Services
Are there elements of utility balancing services that create incentives or opportunities for anti-competitive behavior, or that otherwise place undue burdens on shippers?  If so, what changes should be considered?  Should any such changes apply uniformly to all utilities providing balancing services?
Related Market Conditions Reports and Rebuttal Issues:
•	  Are current procedures, such as PG&E's Operational Flow Orders, Over-nomination Events for SoCalGas, and imbalance trading rules, effective in helping customers balance their daily flows?

•	  What incentives exist for the gas utility to manage its balancing processes in an anti-competitive manner?

•	  What are the decision-making processes by which Operational Flow Orders and Over-nomination Events are called by PG&E and SoCalGas, respectively?  Are such processes well-understood and consistent?

•	  Is sufficient capacity allocated to the system balancing function?

Parties Providing Testimony:

•	  California Generation Coalition
•	  Pan-Canadian
•	  Enron
•	  City of Palo Alto
•	  Calpine
•	  SoCalGas
•	  PG&E

4.  Intrastate Transmission
Does the regulated utility’s need and ability to encumber significant portions of the intrastate transmission system create an opportunity to distort the transmission market?  If so, what changes should be undertaken?
Related Market Conditions Reports and Rebuttal Issues:
•	  Is SoCalGas managing the Hector interconnect in a manner that allows for preferential or anti-competitive consequences?

•	  Has PG&E, through its management electric generation-related gas transmission capacity, inflated the cost of Redwood capacity and placed itself in a position to dominate and profit on the secondary market?

•	  Is information related to the utilities' gas transmission role available or accessible to other internal gas utility departments?

•	  Has PG&E withheld excess intrastate core capacity, particularly on the Baja path, and if so, has this led to inflated prices for transmission capacity?

•	  Is there a robust secondary market for intrastate transmission?

Parties Providing Testimony:

•	  Edison
•	  SoCalGas
•	  Calpine
•	  California Generation Coalition
•	  Palo Alto
•	  Pan-Canadian Energy
•	  Edison
•	  PG&E

5.  Core Procurement
Does the utilities’ role in core procurement bar or inhibit competition for core customers?  If so, what changes should be considered?  What factors should be considered in weighing the costs and benefits of changing the utilities’ core procurement responsibilities?
Related Market Conditions Reports and Rebuttal Issues:
•	  Is information related to gas utilities procurement role available or accessible to other gas utility departments?  In particular, what access does staff have to gas procurement/acquisition information who are involved in providing utility hub and balancing services?

•	  What impact does the utility control of intrastate/interstate transmission in combination with core procurement have on the competitive offering of procurement or transmission services?

•	  Does the gas utility procurement role allow it to propose procurement offers in a manner which unreasonably advantages the gas utility?

Parties Providing Testimony:

•	  Enron
•	  SoCalGas/SDG&E
•	  ORA
•	  California Generation Coalition
•	  Edison

6.  Information Sharing
Do shippers need to obtain information from gas utilities in order to adequately manage and balance their gas flows, or effectively participate in a secondary transportation market?  What information is needed, and why?  Are shippers currently receiving all of the information they need?  If not, why not?  Are shippers seeking information that is too sensitive to release for competitive reasons?  Does the strategy employed for providing such information create an opportunity for discriminatory or anti-competitive conduct?  What changes are needed to meet these concerns?
7.  SoCalGas Transmission and Distribution
What are the barriers to separately operating the transmission and distribution systems owned by SoCalGas?
Please be prepared to discuss the composition of these panels at the prehearing conference.  Are the topics clear and appropriate?  Is it necessary to add one or more additional panels in order the ensure that contentious issues are adequately addressed?  Have we listed all of the relevant issues in each category?  Have we accurately listed all of the parties offering testimony on each topic?  For those parties that have provided reports or rebuttal, which of the witnesses designated to sponsor portions of the filed documents have offered prepared testimony that addresses one or more of the panel topics?  Are there sponsoring witnesses that would not fit into any of the panels?  Parties wishing to cross-examine opposing witnesses should be prepared, at the prehearing conference, to specify who those witnesses are.  Those parties who are offering sponsoring witnesses must be prepared to report on any scheduling constraints.  In the absence of an emergency situation, no constraints will be accommodated after the prehearing conference.
Labor Impacts Panel and Other Topics for Hearing
At the prehearing conference, we will also discuss the development of evidence in areas that may not be covered adequately in the existing documents.  For instance, any party wishing to present evidence on the labor impacts related to the adoption of various proposals must be prepared to express that desire at the prehearing conference and propose a means and schedule for providing such evidence.  In addition, we solicit suggestions as to how to ensure that cost/benefit (and cost shifting) factors are adequately considered as they relate to any proposal.
For instance, we are interesting in exploring costs and benefits associated with rate separation and the competitive offering of billing, metering and related services.
Working Group Reports
The report of the Natural Gas Revenue Cycle Services Safety Working Group, dated September 15, 1998, provides a great deal of useful information for the commission’s consideration.  It also raises questions as to how the commission should proceed, in light of the areas of disagreement that remain.  For those who participated in this process, please come to the prehearing conference prepared to discuss the preferred next steps.  Do participants want to continue meeting in pursuit of further agreement?  Are parties interested in submitting the report to the commission with intention that the commission would “make the calls” in areas where there are competing positions?  Do parties want an opportunity to contest areas of factual disagreement through the submission of prepared testimony?  If so, what are the contested facts?
The report of the Statewide Consistency Working Group, dated September 4, 1998 has already proven to be a useful tool in preparing and analyzing the panel topics.  We anticipate exploring consistency issues with many of the panelists.  We are also likely to address numerous consistency issues in subsequent phases of the Gas Strategy process.  In addition, at this prehearing conference, we would like to hear from participants as to any areas in which they propose follow-up activities.
Workshops
We will also discuss the potential for the use of workshops to understand and resolve one or more concerns raised in the reports, rebuttal and comments.  The questions posed to the Information Sharing panel appear to be particularly promising ones to be addressed collectively by all active parties outside of the hearing room.  We seek your thoughts about this possibility and suggestions of other topics that might be appropriate for a workshop or other alternative setting.  We will also try to address any other procedural concerns parties may raise.
Wild Goose Interconnection
Wild Goose has raised questions about the process used by PG&E to set the price for connecting the Wild Goose storage facilities with the transmission system.  ORA has suggested that most of the issues discussed by Wild Goose may be more appropriate for consideration in a complaint proceeding.  Wild Goose and ORA should be prepared to discuss this procedural suggestion at the prehearing conference.
Hearing Dates
In D.98-10-028, the Commission set hearings for the week of December 7, 1998.  Several parties filed a motion on October 22, 1998, requesting that hearings be rescheduled for  the week of January 11, 1999.  We will reschedule the hearings because a number of parties would have conflicting responsibilities if we were to hold the hearings as previously scheduled.  However, we are unable to hold them the week of January 11, 1999 because of other conflicts.  Instead, the hearings will begin January 19, 1999 and continue for the remainder of that week.  We will add more hearing days to the schedule, if needed.
Please address any questions you may have about the prehearing conference to Trina Horner at 415/703-2132, or tah@cpuc.ca.gov.
IT IS HEREBY RULED that:
1.	  Parties should come to the prehearing conference in San Francisco on November 4, 1998, at 11:00 a.m., prepared to discuss the matters set forth in this ruling.

2.		Hearings in this matter will begin in San Francisco, at 10:00 a.m., on January 19, 1999, and continue from day-to-day as needed.
Dated October 27, 1998, at San Francisco, California.

		original signed SAW	
		Steven Weissman
Administrative Law Judge	

CERTIFICATE OF SERVICE

I certify that I have by mail this day served a true copy of the original attached Administrative Law Judge’s Ruling Prior to November 4, 1998 Prehearing Conference on all parties of record in this proceeding or their attorneys of record.
Dated October 27, 1998, at San Francisco, California.

Fannie Sid	

NOTICE

Parties should notify the Process Office, Public Utilities Commission, 505 Van Ness Avenue, Room 2000, San Francisco, CA  94102, of any change of address to insure that they continue to receive documents. You must indicate the proceeding number on the service list on which your name appears.

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The Commission’s policy is to schedule hearings (meetings, workshops, etc.) in locations that are accessible to people with disabilities. To verify that a particular location is accessible, call: Calendar Clerk (415) 703-1203.

If specialized accommodations for the disabled are needed, e.g., sign language interpreters, those making the arrangements must call the Public Advisor at (415) 703‑2074 or TDD# (415) 703-2032 five working days in advance of the event.