audit of southern california gas company’s affiliate
TRANSCRIPT
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STATE OF CALIFORNIA EDMUND G. BROWN, JR., Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE SAN FRANCISCO, CA 94102
REQUEST FOR PROPOSAL- Primary
Notice to Prospective Proposers
Audit of Southern California Gas Company’s Affiliate Transactions
RFP NO.12PS5079
March 5, 2013
You are invited to review and respond to this Request for Proposal (RFP), entitled RFP Number 12PS5079 Audit of Southern California Gas Company’s Affiliate Transactions. In submitting your proposal, you must comply with these instructions.
Note that all agreements entered into with the State of California will include by reference General Terms and Conditions and Contractor Certification Clauses that may be viewed and downloaded at Internet site www.ols.dgs.ca.gov/Standard+Language. If you do not have Internet access, a hard copy can be provided by contacting the person listed below.
In the opinion of the California Public Utilities Commission, this RFP is complete and without need of explanation. However, if you have questions, or should you need any clarifying information, you may submit your questions on Bidsync in the area marked questions. Please refer to the Key Actions Dates in this RFP for deadlines for questions.
Please note that no verbal information given will be binding upon the State unless such information is issued in writing as an official addendum.
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Table of Contents
Section Page
1) Purpose and Brief Description of Services Required……………………….…………3
A. Summary…………………………………………………………………………………...3
B. Background and Purpose……………………………………………………………….3
C. Audit Scope and Requirements………………………………………………………..4
D. Conflicts of Interest………………………………………………………………………6
2) Minimum Qualifications for Proposers ………………………………………….….……9
3) Key Action Dates …………………………………………………………………………….10
4) Proposal Requirements……………………………………………………………….…...11
A. Work Plan, Schedule, and Cost Detail Format Requirements.............................11
B. Personnel……………………………………………………………………………….....11
5) Submission of Proposal………………………………………………………………….…11
6) Evaluation Process……………………………………………………………………….….13
7) Award and Protest……………………………………………………………………….…..14
8) Disposition of Proposals………………………………………………………...………....14
9) Agreement Execution and Performance…………………………………………..….…14
10) Preference Programs & Special Studies Zones…………….………………………….14
11) Attachments.………………………………………………………………………..…….….16
1. Required Attachment Check List
2. Proposal/Proposer Certification Sheet
3. Sample Cost Proposal Work Sheet
4. Proposer References
5. Conflict of Interest Statement
6. Disabled Veteran Business Enterprise (DVBE) Participation Program ( minimum of 3% required)
7. Payee Data Record (STD 204)*
8. Contractor's Certification Clauses (CCC) (page 1)
9. Darfur Act Certification
10. Small Business Certification
11. Sample Standard Agreement (STD 213)**
12. Affiliate Transaction Rules (ATR)**
*This document is not required with the Proposal package but is required upon award of the contract.
**Provided as a reference only
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1) Purpose and Brief Description of Services Required under this RFP A. Summary
This project requires management audit of Southern California Gas Company’s (SCGC) and its parent holding company’s compliance with the Commission’s Affiliate Transactions Rules (ATR) promulgated by Decision D.97-12-088 in Rulemaking R.97-04-11/Investigation I.97-04-012, et al., revised by D.98-08-035, and most recently revised by D.06-12-029 in R.05-10-030. This audit is required by ATR Rule VI.A and will cover the two calendar years January 1, 2010, through December 31, 2011. B. Background and Purpose In response to applications filed by several energy utilities in the late 1980s and early 1990s, the Commission gave authority to several companies under its jurisdiction to reorganize under a holding company structure.1 The utilities argued that this authority would allow them the flexibility to invest their profits more efficiently. The Commission approved these corporate restructurings, but it expressed serious concerns about the potential for transfer of market power to, and cross subsidy of, unregulated affiliates by these monopolistic energy utilities. To address these concerns the Commission imposed several conditions and rules governing transactions between the utilities and their affiliates. In 1993, the Commission issued D.93-02-019 in R.92-08-008, implementing P.U. Code §§ 587 and 797, which requires the utilities to report their transactions with their affiliates on an annual basis. In 1997, rules governing these transactions were strengthened and consolidated into one set that applied to all jurisdictional energy utilities, in D.97-12-088 of R.97-04-11/I.97-04-12, revised in D.98-08-035.
The Commission instituted a rulemaking (R. 05-10-030) on October 27, 2005, to review, among other
holding company issues, these ATRs, and revise them where appropriate. This rulemaking was issued
partly in response to the enactment by Congress of the Energy Policy Act of 2005, Public Law 109-58
which, among other things, repealed the Public Utility Holding Company Act of 1935 (PUHCA), 15 U.S.C. §§
79-79z-6. The purpose of this rulemaking was to review existing regulations to determine if changes
or additions were required, keeping in mind the following goals: “(1) to ensure that the utilities meet
their public service obligations at the lowest reasonable cost, and (2) to ensure that the utilities do
not favor or otherwise engage in preferential treatment of their affiliates.”2 The Commission issued
decision D. 06-12-029 in this rulemaking and revised some of the ATRs, including Rule VI.C:
Affiliate Audit. The Commission’s Energy Division shall have audits performed biennially by independent auditors. The audits shall cover the last two calendar years which end on December 31, and shall verify that the utility is in compliance with the Rules set forth herein. The Energy Division shall post the audit reports on the Commission’s website. The audits shall be at shareholder expense.3
1 See, e.g., D.86-03-090.
2 R.05-10-030 at 2.
3 D.06-12-029, App’x A-3, at 18. Note, before this change the audits of the ATRs were performed annually by an
auditor chosen and overseen by the utility.
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C. Audit Scope and Requirements
This RFP is issued by the Commission’s Energy Division (ED) staff and asks for written proposals to audit SCGC and its parent holding company’s compliance with the ATRs, under the Commission’s jurisdiction. This management audit will, among other things, determine utility compliance with the ATRs covering the time period January 1, 2010, through December 31, 2011.4 The audit report submitted to the Commission shall include a detailed, plain language, discussion of the following issues, with specific cross-reference to the below paragraph to which each auditor-provided data point is responsive: 1. For each ATR, from Rule I through Rule IX, determine the degree of compliance the utility achieved, per affiliate entity. The report shall identify clearly:
(a) those areas where the utility has complied with the Rule;
(b) the areas where the utility’s compliance with the Rules has been found deficient;
(c) the dates, affiliate names, and details regarding each deficiency and how they were addressed and/or resolved;
(d) by what methods the utility identified and assessed these deficiencies; and
(e) how successful the utility has been in correcting each deficiency.
2. Rule I defines key terms which appear throughout the ATR. Therefore, analysis of Rule I shall focus on the utility’s degree of compliance in its interpretation and application of those definitions, in relation to its affiliate transactions. For example, ATR I.A defines “affiliate,” as “any person, corporation, utility, partnership, or other entity 5 percent or more of whose outstanding securities are owned…by a utility or any of its subsidiaries…” Here, the analysis would focus on whether and to what extent the utility’s interpretation and application of the term “affiliate” complies with the letter and spirit of the definition in ATR I.A.
3. Describe the method(s) the proposer will use to determine the degree of compliance for each rule stated in the report and the degree of certainty attached to each of these conclusions. Per affiliate entity, describe the method by which the auditor will ascertain compliance and identify deficiencies.
4. Rule I defines key terms which appear throughout the ATR. Therefore, analysis of Rule I shall focus on the utility’s degree of compliance in its interpretation and application of those definitions, in relation to its affiliate transactions. For example, ATR I.A defines “affiliate,” as “any person, corporation, utility, partnership, or other entity 5 percent or more of whose outstanding securities are owned…by a utility or any of its subsidiaries…” Here, the analysis would focus on whether and to what extent the utility’s interpretation and application of the term “affiliate” complies with the letter and spirit of the definition in ATR I.A.
5. Describe the method(s) the proposer will use to determine the degree of compliance for each rule stated in the report and the degree of certainty attached to each of these conclusions. Per affiliate entity, describe the method by which the auditor will ascertain compliance and identify deficiencies.
4 This audit covers two calendar years of the utility’s transactions with its affiliates.
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6. Review and test utility records and procedures to ensure the utility has adequate systems in place to enforce the ATR. The proposer must describe the kind of records and procedures it will review to determine whether the utility has adequate systems in place to enforce each ATR. The auditor shall conduct interviews with appropriate utility personnel to help develop this analysis, as needed. Appropriate utility personnel should include a statistically representative cross-section of utility employees, spanning multiple responsibilities and years of experience. The cross-section of employees interviewed should afford the auditor and the Commission an associated degree of confidence in the accuracy of the results. The proposer must include what the specific goals of these interviews will be.
7. The auditor shall pay particular attention to an analysis of the utility’s level of compliance with ATR VII, which governs utilities’ provision of Non-tariffed Products and Services (NTP&S).5 This portion of the audit shall include at a minimum:
(a) A listing of each NTP&S;
(b) A description of the business service or product offered, including its mission statement and operational market goals;
(c) A description of each market into which each NTP&S is being sold, including discussions of the size of the market and of the competitors in this marketplace;
(d) A description of how its entry into the market has affected the relevant marketplace;
(e) The various types, quantities, and costs of utility resources used to develop and sell the NTP&S;
(f) For each NTP&S, audit the actual costs and revenues and determine if the utility has properly complied with the sharing mechanism authorized in the relevant resolution/decision issued by the Commission;
(g) A description of the specific methods used to determine the levels of compliance;
(h) Total revenues generated by these NTP&S, for each individual year of the two years of interest; and
(i) A breakdown of how these additional revenues are allocated between shareholders and ratepayers, including both percentage allocations and specific dollar amounts.
8. The auditor shall review the most recent ATR Compliance Plans submitted by the utility to ensure these Plans are consistent with the auditor’s findings at the utility6. As these Plans are required to be submitted annually under ATR Rule VI.A, any discrepancy between the Plan and the audit findings regarding actual behavior and actions of the utility should be noted and analyzed in the audit report. The auditor may provide suggested steps the utility can take to ensure its Compliance Plan matches its actions.
9. The audit report shall include a discussion of:
(a) What additional Affiliate Transaction Rules (ATR) may be needed;
(b) What existing rules may be unnecessary; and
(c) What existing rules might be improved to enhance effectiveness, increase ease of data collection and monitoring methods, improve accuracy of data; and decrease the cost of compliance by the utility.
10. For each error, discrepancy, or violation of the ATRs by the utility the auditor becomes aware of, please provide:
(a) The auditor’s assessment of the magnitude of the error, discrepancy, or violation;
5 Note that Rule VII governs the provision of products and services by the utility instead of by one of the utility’s affiliates.
6 ATR Compliance Plans will be made available on the Commission’s website.
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(b) The criteria used to determine the magnitude;
(c) The actual or potential harm to the ratepayers as a result of each error, discrepancy, or violation of the ATRs, considering the ATRs overarching goals of i. avoiding cross-subsidization of affiliate activities by ratepayers and ii. maintaining market competition.
This audit will be undertaken under the supervision of the Commission’s ED and performed pursuant to
P.U. Code § 797, with the selected auditor having full access to all information to the full extent provided
by Law, including P.U. Code §§ 313 and 314.
This audit requires familiarity with the management structure of SCGC, its unregulated affiliates, its holding company, and the Commission’s ATRs. The proposer must include a description of its plan to gain the knowledge needed to perform this audit. Furthermore, the auditor shall communicate regularly with the ED contract manager. The auditor will be prepared to testify to the results presented in its reports to the Commission, if the Commission finds it necessary to receive such testimony. The auditor is required to comply with all applicable State rules regarding conflicts of interest. A non-exhaustive overview of State rules regarding conflicts of interest and disclosure guidelines can be found in Attachment 5. Furthermore, the proposer must provide a list of any potential conflicts of interest, as well as the required disclosures referenced in Attachment 5. This list shall include a detailed summary of past business relationships with SCGC, its affiliates, or parent. Conflicts of interest will not necessarily act as a bar to award of the contract, but will be evaluated on a case-by-case basis. This contract shall be performed within one year of the date of final award. The final award is subject to approval by the California Department of General Services (DGS). Throughout the performance of this contract, the auditor will provide the ED monthly updates and written reports of the progress of the work. The Commission shall contract directly with the contractor and payment shall be made from Commission accounts. SCGC’s shareholders shall reimburse the Commission for all amounts expended for the audit.
D. Conflicts of Interest
1. Generally
For purposes of this Agreement, “conflict of interest” means:
a) a conflict of interest as defined in this RFP or any resulting Agreement;
b) a conflict of interest prohibited by any applicable Federal or State law, including the Political Reform Act, relating to conflicts of interest.7; and/or
c) a financial interest that may impair the ability of the individual or firm to deliver fair unbiased work for the State.
d) Current contracts/employment with, or active proposals before the utility, its parent, subsidiary, or affiliate thereof.
The bidder agrees to notify the Commission’s Project Manager promptly of any potential conflict of interest,
including those of all persons performing work for the bidder under this Agreement, whether employees,
7 The Political Reform Act is set forth in Government Code section 81000 et. seq.
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independent contractors or others. The Commission may exercise its option to direct termination of any individual
or firm or this Agreement, if such a conflict is found.
The auditor is required to comply with all applicable State rules regarding conflicts of interest. The proposer shall
submit a conflict of interest statement attesting that it does not have any of the disqualifying interests described
below. Bidder shall also explicitly state whether it has any conflicts of interest, and how it will monitor and detect
any future conflict of interest during the audit. Please note, the duty to monitor conflicts and potential conflicts of
interest is ongoing throughout the bid process and the contract period.
Failure to disclose the above-mentioned could be grounds for disqualification.
2. Automatic Disqualification
The firm is automatically disqualified from the RFP selection if the firm is a party to the Commission’s Rulemaking
(R.) 05-10-030.
3. Disclosures
A. By Firms and subcontractors
This section discusses disclosures that must be made by firms, including subcontractors. A number of conditions
may render a team unable to give impartial, technically sound, objective assistance and advice, otherwise result
in a biased work product, or result in an unfair competitive advantage. In order to properly evaluate and judge the
proposed team, and avoid termination and/or controversy at a later stage, DISCLOSE for each participating firm
and subcontractor:
1) Prior contracts during the last three years with the utility to be audited, its parent holding company, or its affiliates. Provide the total amount of payments, duration, and nature of service.
2) Any current contract, subcontract, active proposals, business relationship with, or any financial interest in any of the utility to be audited, its parent holding company, or its affiliates. List the entity’s name, the nature, the scope, and duration of the relationship or interest and its total monetary value.
3) Any work performed within the last three years for entities planning, developing, constructing or operating the delivery of energy or ancillary services to California consumers (including marketing, brokering, and financial instruments). Provide the client name, total amount of payments, duration, and nature of services provided.
Failure to disclose the above-mentioned could be grounds for disqualification. The disclosures and potential
conflicts will be judged and used as an evaluation criterion in the bid selection process.
B. Disclosures by team members
This section shall apply to all team members or individuals performing work for the Commission, whether
employees, independent contractors or others, who exercise judgment in making recommendations to the CPUC.
The consultant agrees to require any such person who works for the Commission under this Agreement, whether
employees, independent contractors or others, to agree to be bound by the terms of this section of this
Agreement. DISCLOSE for each participating team member or individual performing work for the Commission,
whether employees, independent contractors or others, who exercise judgment in making recommendations to
the Commission:
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1) Any direct or indirect investment worth $2,000 or more in the utility to be audited, its parent holding company, its affiliates, or otherwise related business entities, as defined in California Code of Regulations(CCR), Title 2, Division 6, §18703.1 (d)8.
2) If (i) any individual team member who might perform work in response to this RFP also owns 10% or more of the firm performing the work and (ii) the firm now or within the past 12 months has been under contract with or received income from any of the utility to be audited, its parent holding company, its affiliates, or otherwise related business entities, disclose: the name of the individual; his or her percentage of ownership; cost and length of the contract (or if no contract, the amount of income received and the period over which received); and a brief description of the scope of work. (For purposes of this disclosure, a sole proprietor owns 100% of the firm.)
3) Any income of $500 or more, within the last twelve months, from the utility to be audited, its parent holding company, its affiliates, or otherwise related business entities as defined in CCR, Title 2, Division 6, §18703.1 (d).
4) Any prior contracts, over the last two years, with the utility to be audited, its parent holding company, its affiliates, or otherwise related business entities as defined in CCR, Title 2, Division 6, §18703.1 (d).
5) Any active proposals with the utility to be audited, its parent holding company, its affiliates, or otherwise related business entities as defined in CCR, Title 2, Division 6, §18703.1 (d).
6) Any current position held as a director, officer, partner, trustee, employee, and management in the utility to be audited, its parent holding company, its affiliates, or otherwise related business entities as defined in CCR, Title 2, Division 6, §18703.1 (d).
Failure to disclose the above-mentioned could be grounds for disqualification. The disclosures and
potential conflicts will be judged and used as an evaluation criterion in the bid selection process.
4. Firewalls
A proposer with a conflict of interest or potential conflict of interest, may still be considered for the contract award
if the proposer has adequate “firewall” protections in place to prevent the conflict or potential conflict of interest
from influencing the outcome of the audit. A “firewall” is an information barrier implemented within a firm to
separate and isolate persons who make investment decisions from persons who are privy to undisclosed material
information which may influence those decisions.
In the event a proposer has a conflict or potential conflict of interest, the proposer should disclose and describe, in
detail, the conflict or potential conflict of interest, as well as the system of “firewall” protections it has in place to
prevent the conflict or potential conflict from influencing the outcome of the audit. The ED will evaluate the above
“firewall” protections statement to determine the significance of the conflict or potential conflict of interest and the
adequacy of the “firewall” protections.
If the ED determines the “firewall” protections are adequate to prevent the conflict or potential conflict of interest
from influencing the outcome of the audit, the proposer’s bid will be considered as if it did not have a conflict or
potential conflict. However, if the ED determines the conflict or potential conflict of interest is too significant, or the
“firewall” protections are too inadequate to prevent the conflict or potential conflict from influencing the outcome of
the audit, the bidder’s proposal will be rejected.
8 An individual at a firm may not be able to perform work on this audit if that individual discloses an investment in the utility,
its parent, subsidiary, or affiliates. However, that will not bar a firm from performing the audit if that individual performs no work on the contract.
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5. Rules Relating to Former and Current State Employees
A. Former state employees:
1) For the two-year period from the date of leaving state employment, no former state officer or employee may enter into a contract in which that person was engaged in any of the negotiations, transactions, planning, arrangement or any part of the decision-making process relevant to the contract while employed in any capacity by any state agency.
2) For the twelve-month period from the date of leaving state employment, no former state officer or employee may enter into a contract with any state agency if that person was employed by that state agency in a policy-making position in the same general subject area as the proposed contract within the twelve-month period prior to that person leaving state service. This does not apply to contracts with former employees as an expert witness, or continuation of attorney services the former employee was involved with prior to leaving state service.
3) If Consultant violates any provisions of above paragraphs, such action by Consultant shall render this Agreement void. (Pub. Contract Code §10420)
4) Members of boards and commissions are exempt from this section if they do not receive payment other than payment of each meeting of the board or commission, payment for preparatory time and payment for per diem. (Pub. Contract Code §10430 (e)).
B. Current State Employees: 1) No officer or employee shall engage in any employment, activity, or enterprise from which the officer or employee receives compensation or has a financial interest and which is sponsored or funded by any state agency unless the employment, activity, or enterprise is required as a condition of regular state employment. 2) No officer or employee shall contract on that person’s own behalf as an independent contractor with any state agency to provide goods or services.
2) Minimum Qualifications for Proposers Proposers should have substantial experience performing management audits. Proposers shall provide a list of three recent business references, including dates and the nature of work, on Attachment 4. Additionally, proposers should provide a recent work sample demonstrating capability and experience to perform this audit. Proposers should be able to write clearly and concisely when explaining findings of a technical nature to a non-technical audience. Finally, proposers must have an impeccable reputation for quality and professionalism within their industry. Proposers should be able to occasionally travel to meetings at the Commission at 505 Van Ness, San Francisco, CA, at their own expense.
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3) Key Action Dates
Event Date (Key Action) Date Time
1. RFP available to prospective proposers 3/05/2013
2. Bidder’s Written Questions Submittal Deadline – submit all questions on Bidsync
3/12/2013 5:00 pm PST
3. Answers to Questions Provided by the CPUC – will be posted on Bidsync
3/19/2013 5:00 pm PST
4. Final Proposals Due Tuesday 4/02/2013 5:00 pm PST
5. Technical Evaluation
Thursday 4/04/2013 through
Friday 4/12/2013
6. Bidder Interviews and Presentations
Monday 4/15/2013 through
Wednesday 4/24/2013
7. Public Bid Opening Monday 4/29/2013
8. “Intent to Award” Public Posting in CPUC Lobby
Tuesday 4/30/2013 By 4:00 PM PST
9.
The five (5) day Protest Period begins - The Protest Period Ends
Beginning Wednesday 5/01/2013
Ending Tuesday 5/07/2013
Ending At 5:00 PM PST
10. Contract Award Date
Wednesday 5/08/2013
11.
Contract documents out to Awardee (Contractor) for review & signature via FedEX By Monday 5/13/2013
12. All Documents to DGS for Review & Approval By Thursday 5/17/2013
13. Estimated Contract Commencement Date Contract term begins
6/10/2013
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4) Proposal Requirements
A. Work Plan, Schedule, and Cost Detail Format Requirements
Each proposal shall develop a work plan or schedule for task completion. Identify each major task, necessary sub-task, and/or specific milestones by which progress can be measured and payments made. Work shall begin by June 15, 2013.
Use Attachment 4, Sample Cost Proposal Worksheet as a guide in preparing your cost proposal.
B. Personnel
List all personnel who will be working on the project. Give their titles and a brief list of their qualifications.
5) Submission of Proposal
a) Proposals should provide straightforward and concise descriptions of the proposer's ability to satisfy the requirements of this RFP. The proposal must be complete and accurate. Omissions, inaccuracies, or misstatements will be sufficient cause for rejection of a proposal.
b) The proposal package should be prepared in the least expensive method, given all other
requirements.
c) All proposals must be submitted under sealed cover and sent via U.S. mail , overnight delivery, or hand delivered to the CPUC Contracts Office by Tuesday April 02, 2013 by 5:00 PM (PST) see key action dates. Proposals received after this date and time will not be considered.
d) A minimum of one (1) original and four (4) copies of the proposal must be submitted.
e) The original proposal must be marked "ORIGINAL COPY." All documents contained in the original
proposal package must have original signatures and must be signed by a person who is authorized to bind the proposing firm. All additional proposal sets may contain photocopies of the original package.
f) The proposal package must be plainly marked with the RFP title and number and "DO NOT OPEN," as shown in the following example:
Audit of Southern California Gas Company’s Affiliate Transactions
RFP #12PS5079 DO NOT OPEN
g) The bid price and all cost information must be submitted in a separate sealed envelope. The
envelope should be affixed to the outside of the proposal package and marked “Sealed Cost Proposal-DO NOT OPEN.” Proposals not submitted under sealed cover and marked as indicated above may be rejected.
h) All proposals shall include the documents identified in Attachment 1, Required Attachment Checklist.
Proposals not including the proper "Required Attachments" shall be deemed non-responsive. A non-responsive proposal is one that does not meet the basic proposal requirements.
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i) Overnight mail or deliver proposals to the following address:
California Public Utilities Commission Attn: Joyce Swisher - Contract Office
505 Van Ness Ave., Room 2004 San Francisco, CA 94102
j) Proposals must be submitted for the performance of all the services described herein. Any
deviation from the work specifications will not be considered and will cause a proposal to be rejected.
k) A proposal may be rejected if it is conditional or incomplete, if it contains any alterations of form,
or for other irregularities of any kind. The State may reject any or all proposals and may waive any immaterial deviation in a proposal. The State's waiver of immaterial deviation shall in no way modify the RFP document or excuse the proposer from full compliance with all requirements if awarded the agreement.
l) Costs incurred for developing proposals and in anticipation of award of the agreement are entirely
the responsibility of the proposer and shall not be charged to the State of California. m) An individual who is authorized to bind the proposing firm contractually shall sign the Attachment
2, Proposal/Proposer Certification Sheet. The signature must indicate the title or position the individual holds in the firm. An unsigned proposal may be rejected.
n) If the proposal is made under a fictitious name or business title, the actual legal name of the proposer must be provided.
o) A proposer may modify a proposal after its submission by withdrawing its original proposal and
resubmitting a new proposal prior to the proposal submission deadline of April 2, 2013. Proposal modifications offered in any other manner, oral or written, will not be considered.
p) A proposer may withdraw its proposal by submitting a written withdrawal request to the State, signed by the proposer or an authorized agent. A proposer may thereafter submit a new proposal prior to the proposal submission deadline. Proposals may not be withdrawn without cause subsequent to the proposal submission deadline.
q) The Commission may modify the RFP prior to the date fixed for submission of proposals by the
issuance of an addendum to all parties who submitted a proposal package. r) The Commission reserves the right to reject all proposals. The Commission is not required to
award an agreement. s) Before submitting a response to this solicitation, prospective proposers should review, correct all
errors, and confirm compliance with the RFP requirements. t) Where applicable, proposer should carefully examine work sites and specifications. No additions
or increases to the agreement amount will be made due to a lack of careful examination of work sites and specifications.
u) More than one proposal from an individual, firm, partnership, corporation or association under the
same or different names, will not be considered.
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v) The State does not accept alternate contract language from a prospective contractor. A proposal with such language will be considered a counter-proposal and will be rejected. The State’s General Terms and Conditions (GTC) are not negotiable.
w) No oral understanding or agreement shall be binding on either party.
6) Evaluation Process
a) The Proposals will be opened and reviewed by Commission staff beginning April 2, 2013. Each proposal will be checked for conformance with the submission requirements of this RFP.
b) Proposals that contain false or misleading statements, or which provide references which do not support an attribute or condition claimed by the proposer, may be rejected. A proposal may be rejected if it is conditional, incomplete, or contains any alteration of form or any irregularities of any kind that could materially change the prices or costs in the bidder’s proposal.
c) Proposals will first be reviewed and evaluated in accordance with the Phases described below:
i. Phase I
Proposals that meet the minimum qualifications will be evaluated and scored according to the criteria indicated below. Proposals which achieve a minimum of 80 points out of a possible 100 will be considered responsive.
Rating/Scoring Criteria Maximum Possible Points
Thoroughness and completeness of work plan 30
Quality of prior written reports and references 30
Experience with similar management audits 20
Experience with energy company analysis 10
Analytical techniques to be employed 10
Total Possible Points 100
ii. Phase II
Phase II consists of a presentation to the Commission staff that should address the five attributes listed above. The presentation should be given by the proposer’s potential project manager. The Commission’s project manager and members of the selection panel may ask questions about the proposal. The presentations will be scheduled in advance, at a time mutually acceptable to the proposer and the Commission’s project manager, between the dates of April 15, 2013 and April 24, 2013. The bidders will be notified if supplemental information is required for the presentation. The scoring criteria for Phase II will be:
40% - The bidder’s demonstration of competence to perform the analysis with respect to the five points listed above;
20% - the merits of the bidder’s proposed approach to the analysis;
20% - the quality of the bidder’s responses to questions from the selection panel; and
20% - the bidder’s overall communication and presentation skills.
In order to qualify as a responsible bidder for Phase III, the bidder must receive a minimum score of 85 points out of a possible 100 in Phase II.
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iii. Phase III
Phase III consists of the Public bid opening for the lowest cost estimate. Bids must be in separate sealed envelopes from the proposals. The Commission staff will open only cost bid envelopes of the responsive candidates that have met the scoring criteria described in Phase I and Phase II, as described above. The responsive candidate, who submits the lowest bid, after all the preference points have been evaluated, will be awarded the contract.
7) Award and Protest
a) Notice of the proposed award shall be posted in a public place, in the lobby, at the Public Utilities Commission, 505 Van Ness Ave., San Francisco, and at www.cpuc.ca.gov for five (5) working days prior to awarding the agreement.
b) If any bidder, prior to the award of agreement, files a protest with the Commission and the Department of General Services (DGS), Office of Legal Services, 707 Third Street, 7th Floor, Suite 7-330, West Sacramento, CA 95605, on the grounds that the protesting bidder would have been awarded the contract, had the agency correctly applied the evaluation standard in this RFP, or if the agency had followed the evaluation and scoring methods in this RFP, but did not, the agreement shall not be awarded until either the protest has been withdrawn or DGS has decided the matter. It is suggested that any protestor submit claims by certified or registered mail.
c) Within five (5) days after filing the initial protest, the protesting bidder shall file with DGS-Office of Legal Services and the Commission (Attn: Joyce Swisher) a detailed statement specifying the grounds for the protest.
d) Upon resolution of the protest and award of the agreement, the successful bidder (the “Contractor”) must complete and submit to the Commission, the Payee Data Record (STD 204), to determine if the Contractor is subject to state income tax withholding pursuant to California Revenue and Taxation Code Sections 18662 and 26131. This form can be found on the Internet at www.osp.dgs.ca.gov under the heading “FORMS MANAGEMENT CENTER.” No payment shall be made to the Contractor unless a completed STD 204 has been returned to the awarding agency.
e) Upon resolution of the protest and award of the agreement, the Contractor must sign and submit to the Commission, page one (1) of the Contractor Certification Clauses (CCC), which can be found on at www.ols.dgs.ca.gov/contracts.
8) Disposition of Proposals
Upon proposal opening, all documents submitted in response to this RFP will become the property of the State of California, and will be regarded as public records under the California Public Records Act, (Government Code Section 6250 et seq.), and subject to review by the public. Proposal packages may be returned only at the proposer’s expense.
9) Agreement Execution and Performance
Service shall start not later than five days, or on the express date set by the awarding agency and the Contractor, after all approvals have been obtained and the agreement is fully executed. Should the Contractor fail to commence work at the agreed upon time, the awarding agency, upon five (5) days written notice to the Contractor, reserves the right to terminate the agreement. In addition, the Contractor shall be liable to the State for the difference between Contractor's Proposal price and the actual cost of performing work by another contractor.
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10) Preference Programs & Special Studies Zones
a) Small Business preference program- www.dgs.ca.gov/pd/Programs.aspx (SB/DVBE - OSDS tab)
Public Contract Code Section 10115 et seq., requires contract participation of at least three percent (3%) for Disabled Veteran Business Enterprise (DVBE). DVBE participation requirements are included for this contract. This solicitation provides program information and bidder responsibilities for the DVBE Participation Program. Bidders must meet DVBE Participation Program requirements to be viewed as responsive and considered for the contract award. Failure to submit a complete response may result in a non-responsive determination, in which case the bid will be rejected.
The Office of Small Business Certification offers program information and may be reached at: http://www.dgs.ca.gov/pd/Programs/OSDS/SBEligibilityBenefits.aspx
An explanation of the Disabled Veteran Enterprise Program (DVBE) requirements can be found at the Internet
web site www.dgs.ca.gov/pd/Programs/osds.aspx. The DVBE package and the required submittal forms can be
found at the Internet website www.dgs.ca.gov/pd/Programs/osds.aspx.
b) TACPA, LAMBRA and EZA Preference Programs
The state has three programs designed to stimulate business and employment in geographic areas determined to be economically distressed, with areas of high unemployment. These programs are the Target Area Contract Preference Act (TACPA), the Local Agency Military Base Recovery Area Act (LAMBRA), and the Enterprise Zone Act (EZA). The DGS Procurement Division/Dispute Resolution/Preference Program Section administers these programs and provides resource information about the programs. The Dispute Resolution general number is (916) 375-4611. The DGS Preference Program information line is (916) 375-4609. TACPA, LAMBRA and EZA bid evaluation preferences are available as described in RFP Section VII.C.4.d.
1. Target Area Contract Preference Act (TACPA)
Preference will be granted to California-based Contractors in accordance with California Government Code Section 4530 et seq., whenever contract for goods and services are in excess of $100,000 and the Contractor
meets certain requirements as defined in the CCR (Title 2, Section 1896.30) regarding labor needed to produce the goods or provide the services being procured. Bidders desiring to claim Target Area Contract Preferences Act shall complete Std. Form 830 and submit it with the Final Proposal. Refer to the following website link to obtain the appropriate form with instructions:
www.documents.dgs.ca.gov/osp/pdf/std830.pdf
A bidder who has claimed a TACPA preference(s) and is awarded the contract will be obligated to perform in accordance with the preference(s) requested, provided that the TACPA preference(s) was granted in obtaining the contract.
If there is no intention of claiming this preference, the Bidder does not need to submit the STD Form 830.
Bidders seeking the TACPA preference must complete and submit the required form and all necessary attachments with their bids.
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2. Local Area Military Base Recovery Act (LAMBRA)
Local Agency Military Base Recovery Act (LAMBRA), Government Code section 7105 et seq., promotes employment and economic development at designated military bases by offering preferences when bidding on State contracts in excess of $100,000. The firm must be California based. Additional information can be found at:
www.hcd.ca.gov/fa/cdbg/ez/
www.hcd.ca.gov/fa/cdbg/ez/lambra
Bidders desiring to claim this preference must submit a fully executed copy of Std. Form 832 and any required attachments with their Final Proposal. Bidders proposing to perform the contract at a designated LAMBRA worksite(s) are required to identify such site(s) on the Std. Form 832. Failure to identify a site(s), which qualifies for LAMBRA, will result in denial of the claimed preferences. Refer to the following website link to obtain the appropriate form with instructions:
www.documents.dgs.ca.gov/osp/pdf/std832.pdf
A bidder that has claimed a LAMBRA preference and is awarded the contract based on such preference(s) will be obligated to perform the contract in accordance with the Act.
If there is no intention of claiming this preference, the Bidder does not need to submit STD Form 832.
3. Enterprise Zone Act (EZA)
California Government Code Section 7070, et seq., provides that California based companies may be granted preferences when bidding on State contracts in excess of $100,000 for goods and services (excluding construction contracts) if the business site is located within designated "Enterprise Zones" (see Std. Form 831). Additional information can be found at:
www.hcd.ca.gov/fa/cdbg/ez/
www.hcd.ca.gov/fa/cdbg/ez/EZoverview.html
Bidders desiring to claim this preference must submit a fully executed copy of Std. Form 831 and all necessary attachments with their Final Proposal. Bidders proposing to perform the contract in a designated enterprise zone are required to identify such site(s) on the Std. Form 831. Failure to identify a site(s) which qualifies as an enterprise zone will result in denial of the claimed preferences. Refer to the following website link to obtain the appropriate form with instructions:
www.documents.dgs.ca.gov/osp/pdf/std831.pdf
A bidder that has claimed an EZA preference and is awarded the contract based on such preference(s) will be obligated to perform the contract in accordance with the Act. If there is no intention of claiming this preference, the Bidder does not need to submit the STD Form 831.
11) Attachments
See the below list on Attachment 1 for required attachments to be submitted along with the each proposal.
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ATTACHMENT 1
REQUIRED ATTACHMENT CHECK LIST
A complete proposal or proposal package will consist of the items identified below.
Complete this checklist to confirm the items in your proposal. Place a check mark or “X” next to each item that you are submitting to the State. For your proposal to be responsive, all required attachments must be returned. This checklist should be returned with your proposal package also.
Attachment Attachment Name/Description
_____ Attachment 1 Required Attachment Check List
_____ Attachment 2 Proposal/Proposer Certification Sheet
_____ Attachment 3 Sample Cost Proposal Worksheet
_____ Attachment 4 Proposer References
_____ Attachment 5 Conflict of Interest Statement
_____ Attachment 6 Disabled Veteran Business Enterprise Participation Forms and Instructions (A minimum of 3% DVBE participation is required by the State of CA.)
_____ Attachment 7 Payee Data Record (STD 204) (required upon contract award)
_____ Attachment 8 Contractor Certification Clauses (CCC) 307.
_____ Attachment 9 Darfur Certification
_____ Attachment 10 Small Business Certification
_____ Attachment 11 Target Area Contract Preference Act TACPA, EZA, LAMBRA. (If applicable)
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ATTACHMENT 2
PROPOSAL/PROPOSER CERTIFICATION SHEET
The below Proposal/Proposer Certification Sheet must be signed and returned along with all the "required attachments" as an entire package in duplicate with original signatures. The proposal must be transmitted in a sealed envelope in accordance with RFP instructions. For RFP Primary Only: A. Our all-inclusive cost proposal is submitted in a sealed envelope marked
"Cost Proposal - Do Not Open".
B. Place all required attachments behind this certification sheet. C. I have read and understand the DVBE Participation requirements and have included documentation
demonstrating that I have met the participation goals or have made a good faith effort. D. The signature affixed hereon and dated certifies compliance with all the requirements of this proposal
document. The signature below authorizes the verification of this certification.
E. An Unsigned Proposal/Proposer Certification sheet may be cause for rejection
1. Company Name 2. Telephone Number 2a. Fax Number ( ) ( )
3. Address
Indicate your organization type: 4. Sole Proprietorship 5. Partnership 6. Corporation
Indicate the applicable employee and/or corporation number: 7. Federal Employee ID No. (FEIN) 8. California Corporation No.
9. Indicate applicable license and/or certification information:
10. Proposer’s Name (Print) 11. Title
12. Signature 13. Date
14. Are you certified with the Department of General Services, Office of Small Business Certification and Resources (OSBCR) as:
a. California Small Business Enterprise Yes No
If yes, enter certification number:
b. Disabled Veteran Business Enterprise Yes No
If yes, enter your service code below:
NOTE: A copy of your Certification is required to be included if either of the above items is checked “Yes”. Date application was submitted to OSBCR, if an application is pending:
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ATTACHMENT 2 (cont.)-Completion Instructions for Proposal/Proposer Certification Sheet
Complete the numbered items on the Proposal/Proposer Certification Sheet by following the instructions below.
Item Numbers
Instructions
1, 2, 2a,
3
Must be completed. These items are self-explanatory.
4
Check if your firm is a sole proprietorship. A sole proprietorship is a form of business in which one person owns all the assets of the business in contrast to a partnership and corporation. The sole proprietor is solely liable for all the debts of the business.
5
Check if your firm is a partnership. A partnership is a voluntary agreement between two or more competent persons to place their money, effects, labor, and skill, or some or all of them in lawful commerce or business, with the understanding that there shall be a proportional sharing of the profits and losses between them. An association of two or more persons to carry on, as co-owners, a business for profit.
6
Check if your firm is a corporation. A corporation is an artificial person or legal entity created by or under the authority of the laws of a state or nation, composed, in some rare instances, of a single person and his successors, being the incumbents of a particular office, but ordinarily consisting of an association of numerous individuals.
7
Enter your federal employee tax identification number.
8
Enter your corporation number assigned by the California Secretary of State’s Office. This information is used for checking if a corporation is in good standing and qualified to conduct business in California.
9
Complete, if applicable, by indicating the type of license and/or certification that your firm possesses and that is required for the type of services being procured.
10,11 12, 13,
Must be completed. These items are self-explanatory.
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If certified as a California Small Business, place a check in the "yes" box, and enter your certification number on the line. If certified as a Disabled Veterans Business Enterprise, place a check in the "Yes" box and enter your service code on the line. If you are not certified to one or both, place a check in the "No" box. If your certification is pending, enter the date your application was submitted to OSBCR.
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ATTACHMENT 3
SAMPLE COST PROPOSAL WORKSHEET
DIRECT LABOR HOURS RATE TOTAL
Program Manager __________@ __________ __________
Staff Assistant __________@ __________ __________
Technician __________@ __________ __________
Clerical __________@ __________ __________
$__________
SUBCONTRACTOR(S) COST ITEMIZED $__________
INDIRECT COSTS (OVERHEAD AND FRINGE BENEFITS)
Overhead Rate __________ __________
Fringe Benefits __________ __________
$__________
DIRECT COSTS (EXCEPT LABOR)
Travel Costs __________
Equipment and Supplies (Itemized) __________
Other Direct Costs (Itemized) __________
$__________
TOTAL COSTS $__________
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ATTACHMENT 4
PROPOSER REFERENCES
Proposer must provide references regarding prior work efforts. Submission of this attachment is, however, optional. Failure to complete and return this attachment with your proposal will not cause your proposal to be rejected and deemed nonresponsive.
List below three references of similar types of services performed within the last five years. If three references cannot be provided, please explain why on an attached sheet of paper.
REFERENCE 1
Name of Firm
Street Address City State Zip Code
Contact Person Telephone Number
Dates of Service Value or Cost of Service
Brief Description of Service Provided
REFERENCE 2
Name of Firm
Street Address City State Zip Code
Contact Person Telephone Number
Dates of Service Value or Cost of Service
Brief Description of Service Provided
REFERENCE 3
Name of Firm
Street Address City State Zip Code
Contact Person Telephone Number
Dates of Service Value or Cost of Service
Brief Description of Service Provided
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ATTACHMENT 5
CONFLICT OF INTEREST STATEMENT
In accordance with RFP Section Error! Reference source not found. Error! Reference source
not found., Bidders and their proposed team members, including subcontractors, cannot have
the following disqualifying economic interests to bid the contract:
1. Any direct or indirect investment worth $2,000 or more in the utility, its parent holding
company, its affiliates, or otherwise related business entities as defined in California Code of
Regulations (CCR), Title 2, Division 6, §18703.1 (d).
2. Any income of $500 or more, within the last twelve months, from the utility, its parent
holding company, its affiliates, or otherwise related business entities as defined in CCR, Title 2,
Division 6, §18703.1 (d).
3. Any prior contracts, over the last two years, with the utility, its parent holding company,
its affiliates, or otherwise related business entities as defined in CCR, Title 2, Division 6,
§18703.1 (d).
4. Any active proposals with the utility, its parent holding company, its affiliates, otherwise
related business entities as defined in CCR, Title 2, Division 6, §18703.1 (d).
5. Any current position held as a director, officer, partner, trustee, employee, and
management in the utility, its parent holding company, its affiliates,.
Bidders need to be aware of the following provisions regarding current or former state employees
and disclose any disqualifying interests from the following provisions:
Current State Employees (Public Contract Code §10410):
1. No officer or employee shall engage in any employment, activity or enterprise from
which the officer or employee receives compensation or has a financial interest and which is
sponsored or funded by any state agency, unless the employment, activity or enterprise is
required as a condition of regular state employment.
2. No officer or employee shall contract on his or her own behalf as an independent
contractor with any state agency to provide goods or services.
Former State Employees (Public Contract Code §10411):
1. For the two-year period from the date he or she left state employment, no former state
officer or employee may enter into a contract in which he or she engaged in any of the
negotiations, transactions, planning, arrangements or any part of the decision-making process
relevant to the contract while employed in any capacity by any state agency.
2. For the twelve-month period from the date he or she left state employment, no former
state officer or employee may enter into a contract with any state agency if he or she was
employed by that state agency in a policy-making position in the same general subject area as
the proposed contract within the 12-month period prior to his or her leaving state service.
By submitting this Conflict of Interest Statement with its proposal, the Bidder named below hereby
attests that
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1. It and its proposed team members, including employees, subcontractor(s), and/or
anyone performing the scope of work indicated in Section 1) C., Audit Scope and Requirements,
do not have any of the aforementioned economic interests.
2. It and its proposed team members, , including employees, subcontractor(s), and/or
anyone performing the scope of work indicated in Section 1) C., Audit Scope and Requirements,
are compliance with Public Contract Code §10410 and §10411, which applies to current and
former State employees.
3. It and its proposed team members, , including employees, subcontractor(s), and/or
anyone performing the scope of work indicated in Section 1) C., Audit Scope and Requirements,
agrees to refrain from entering into any relationship that could result in a conflict of interest.
4. It will notify the Commission’s Project Manager promptly of any potential conflict of
interest, including those of its employees, subcontractors, and/or anyone performing the scope
of work indicated in Section 1) C., Audit Scope and Requirements.
Name of Bidder: __________________________________
Signed by: _____________________________________
Printed name: ____________________________________
Title: _____________________________________
Date: _____________________________________
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ATTACHMENT 6 – DVBE DECLARATIONS (STD 843)
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ATTACHMENT 6 (cont.) – BIDDER DECLARATION (GSPD-05-105)
All bidders must complete the Bidder Declaration GSPD-05-105 and include it with their proposal. When completing the declaration, Bidders must identify all subcontractors proposed for participation in the contract. Bidders awarded a contract are contractually obligated to use the subcontractors for the corresponding work identified unless the State agrees to a substitution and it is incorporated by amendment to the contract. At the State’s option prior to award, bidders may be required to submit additional written clarifying information. Failure to submit the requested written information as specified may be grounds for bid rejection. A copy of the Bidder Declaration GSPD-05-105 and its instructions, are provided on the next two pages. Please read the instructions carefully. The form with its instructions is also available as a fill and print PDF at: www.documents.dgs.ca.gov/pd/poliproc/MASTEr-BidDeclar08-09.pdf
DVBE SB548 – Replacement of Disabled Veteran Business Enterprise Subcontractors
Contractor understands and agrees that should award of this contract be based in part on their commitment to use the Disabled Veteran Business Enterprise (DVBE) subcontractor(s) identified in their bid or offer, per military and Veterans Code 999.5 (e), a DVBE subcontractor may only be replaced by another DVBE subcontractor and must be approved by the Department of General Services (DGS). Changes to the scope of work that impact the DVBE subcontractor(S) identified in the bid or offer and approved DVBE substitutions will be documented by contract amendment. Failure of Contractor to seek substitution and adhere to the DVBE participation level identified in the bid or offer may be cause for contract termination, recovery of damages under rights and remedies due to State, and penalties as outlined in M&VC § 999.9; Public Contract Code (PCC) § 10115.10, or PCC § 4110 (applies to public works only).
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ATTACHMENT 7
PAYEE DATA RECORD
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ATTACHMENT 8
CONTRACTOR’S CERTIFICATION CLAUSE (CCC-307)
CERTIFICATION
I, the official named below, CERTIFY UNDER PENALTY OF PERJURY that I am duly authorized to legally
bind the prospective Contractor to the clause(s) listed below. This certification is made under the laws of the
State of California.
Contractor/Bidder Firm Name (Printed)
Federal ID Number
By (Authorized Signature)
Printed Name and Title of Person Signing
Date Executed Executed in the County of
CONTRACTOR CERTIFICATION CLAUSES
1. STATEMENT OF COMPLIANCE: Contractor has, unless exempted, complied with the nondiscrimination
program requirements. (Gov. Code §12990 (a-f) and CCR, Title 2, Section 8103) (Not applicable to public
entities.)
2. DRUG-FREE WORKPLACE REQUIREMENTS: Contractor will comply with the requirements of the
Drug-Free Workplace Act of 1990 and will provide a drug-free workplace by taking the following actions:
a. Publish a statement notifying employees that unlawful manufacture, distribution, dispensation, possession or
use of a controlled substance is prohibited and specifying actions to be taken against employees for violations.
b. Establish a Drug-Free Awareness Program to inform employees about:
1) the dangers of drug abuse in the workplace;
2) the person's or organization's policy of maintaining a drug-free workplace;
3) any available counseling, rehabilitation and employee assistance programs; and,
4) penalties that may be imposed upon employees for drug abuse violations.
30
c. Every employee who works on the proposed Agreement will:
1) receive a copy of the company's drug-free workplace policy statement; and,
2) agree to abide by the terms of the company's statement as a condition of employment on the Agreement.
Failure to comply with these requirements may result in suspension of payments under the Agreement or
termination of the Agreement or both and Contractor may be ineligible for award of any future State agreements
if the department determines that any of the following has occurred: the Contractor has made false certification,
or violated the certification by failing to carry out the requirements as noted above. (Gov. Code §8350 et seq.)
3. NATIONAL LABOR RELATIONS BOARD CERTIFICATION: Contractor certifies that no more than one
(1) final unappealable finding of contempt of court by a Federal court has been issued against Contractor within
the immediately preceding two-year period because of Contractor's failure to comply with an order of a Federal
court, which orders Contractor to comply with an order of the National Labor Relations Board. (Pub. Contract
Code §10296) (Not applicable to public entities.)
4. CONTRACTS FOR LEGAL SERVICES $50,000 OR MORE- PRO BONO REQUIREMENT: Contractor
hereby certifies that contractor will comply with the requirements of Section 6072 of the Business and
Professions Code, effective January 1, 2003.
Contractor agrees to make a good faith effort to provide a minimum number of hours of pro bono legal services
during each year of the contract equal to the lessor of 30 multiplied by the number of full time attorneys in the
firm’s offices in the State, with the number of hours prorated on an actual day basis for any contract period of
less than a full year or 10% of its contract with the State.
Failure to make a good faith effort may be cause for non-renewal of a state contract for legal services, and may
be taken into account when determining the award of future contracts with the State for legal services.
5. EXPATRIATE CORPORATIONS: Contractor hereby declares that it is not an expatriate corporation or
subsidiary of an expatriate corporation within the meaning of Public Contract Code Section 10286 and 10286.1,
and is eligible to contract with the State of California.
6. SWEATFREE CODE OF CONDUCT:
a. All Contractors contracting for the procurement or laundering of apparel, garments or corresponding
accessories, or the procurement of equipment, materials, or supplies, other than procurement related to a public
works contract, declare under penalty of perjury that no apparel, garments or corresponding accessories,
equipment, materials, or supplies furnished to the state pursuant to the contract have been laundered or
produced in whole or in part by sweatshop labor, forced labor, convict labor, indentured labor under penal
sanction, abusive forms of child labor or exploitation of children in sweatshop labor, or with the benefit of
sweatshop labor, forced labor, convict labor, indentured labor under penal sanction, abusive forms of child labor
or exploitation of children in sweatshop labor. The contractor further declares under penalty of perjury that they
adhere to the Sweat free Code of Conduct as set forth on the California Department of Industrial Relations
website located at www.dir.ca.gov, and Public Contract Code Section 6108.
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b. The contractor agrees to cooperate fully in providing reasonable access to the contractor’s records,
documents, agents or employees, or premises if reasonably required by authorized officials of the contracting
agency, the Department of Industrial Relations, or the Department of Justice to determine the contractor’s
compliance with the requirements under paragraph (a).
7. DOMESTIC PARTNERS: For contracts over $100,000 executed or amended after January 1, 2007, the
contractor certifies that contractor is in compliance with Public Contract Code section 10295.3.
DOING BUSINESS WITH THE STATE OF CALIFORNIA
The following laws apply to persons or entities doing business with the State of California.
1. CONFLICT OF INTEREST: Contractor needs to be aware of the following provisions regarding current or
former state employees. If Contractor has any questions on the status of any person rendering services or
involved with the Agreement, the awarding agency must be contacted immediately for clarification.
Current State Employees (Pub. Contract Code §10410):
1). No officer or employee shall engage in any employment, activity or enterprise from which the officer or
employee receives compensation or has a financial interest and which is sponsored or funded by any state
agency, unless the employment, activity or enterprise is required as a condition of regular state employment.
2). No officer or employee shall contract on his or her own behalf as an independent contractor with any state
agency to provide goods or services.
Former State Employees (Pub. Contract Code §10411):
1). For the two-year period from the date he or she left state employment, no former state officer or employee
may enter into a contract in which he or she engaged in any of the negotiations, transactions, planning,
arrangements or any part of the decision-making process relevant to the contract while employed in any
capacity by any state agency.
2). For the twelve-month period from the date he or she left state employment, no former state officer or
employee may enter into a contract with any state agency if he or she was employed by that state agency in a
policy-making position in the same general subject area as the proposed contract within the 12-month period
prior to his or her leaving state service.
If Contractor violates any provisions of above paragraphs, such action by Contractor shall render this
Agreement void. (Pub. Contract Code §10420)
Members of boards
and commissions are exempt from this section if they do not receive payment other than payment of each
meeting of the board or commission, payment for preparatory time and payment for per diem. (Pub. Contract
Code §10430 (e))
2. LABOR CODE/WORKERS' COMPENSATION: Contractor needs to be aware of the provisions which
require every employer to be insured against liability for Worker's Compensation or to undertake self-insurance
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in accordance with the provisions, and Contractor affirms to comply with such provisions before commencing
the performance of the work of this Agreement. (Labor Code Section 3700)
3. AMERICANS WITH DISABILITIES ACT: Contractor assures the State that it complies with the Americans
with Disabilities Act (ADA) of 1990, which prohibits discrimination on the basis of disability, as well as all
applicable regulations and guidelines issued pursuant to the ADA. (42 U.S.C. 12101 et seq.)
4. CONTRACTOR NAME CHANGE: An amendment is required to change the Contractor's name as listed on
this Agreement. Upon receipt of legal documentation of the name change the State will process the amendment.
Payment of invoices presented with a new name cannot be paid prior to approval of said amendment.
5. CORPORATE QUALIFICATIONS TO DO BUSINESS IN CALIFORNIA:
a. When agreements are to be performed in the state by corporations, the contracting agencies will be verifying
that the contractor is currently qualified to do business in California in order to ensure that all obligations due to
the state are fulfilled.
b. "Doing business" is defined in R&TC Section 23101 as actively engaging in any transaction for the purpose
of financial or pecuniary gain or profit. Although there are some statutory exceptions to taxation, rarely will a
corporate contractor performing within the state not be subject to the franchise tax.
c. Both domestic and foreign corporations (those incorporated outside of California) must be in good standing
in order to be qualified to do business in California. Agencies will determine whether a corporation is in good
standing by calling the Office of the Secretary of State.
6. RESOLUTION: A county, city, district, or other local public body must provide the State with a copy of a
resolution, order, motion, or ordinance of the local governing body which by law has authority to enter into an
agreement, authorizing execution of the agreement.
7. AIR OR WATER POLLUTION VIOLATION: Under the State laws, the Contractor shall not be: (1) in
violation of any order or resolution not subject to review promulgated by the State Air Resources Board or an
air pollution control district; (2) subject to cease and desist order not subject to review issued pursuant to
Section 13301 of the Water Code for violation of waste discharge requirements or discharge prohibitions; or (3)
finally determined to be in violation of provisions of federal law relating to air or water pollution.
8. PAYEE
DATA RECORD FORM STD. 204: This form must be completed by all contractors
that are not another state agency or other governmental entity. S:\ADMIN\HOMEPAGE\CCC\draft CCC-
307.doc
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ATTACHMENT 9
DARFUR CONTRACTING ACT CERTIFICATION
Public Contract Code Sections 10475 -10481 applies to any company that currently or within the previous three years has had business activities or other operations outside of the United States. For such a company to bid on or submit a proposal for a State of California contract, the company must certify that it is either a) not a scrutinized company; or b) a scrutinized company that has been granted permission by the Department of General Services to submit a proposal. If your company has not, within the previous three years, had any business activities or other operations outside of the United States, you do not need to complete this form. OPTION #1 - CERTIFICATION If your company, within the previous three years, has had business activities or other operations outside of the United States, in order to be eligible to submit a bid or proposal, please insert your company name and Federal ID Number and complete the certification below. I, the official named below, CERTIFY UNDER PENALTY OF PERJURY that a) the prospective Proposer/bidder named below is not a scrutinized company per Public Contract Code 10476; and b) I am duly authorized to legally bind the prospective proposer/bidder named below. This certification is made under the laws of the State of California.
OPTION #2 – WRITTEN PERMISSION FROM DGS Pursuant to Public Contract Code section 10477(b), the Director of the Department of General Services may permit a scrutinized company, on a case-by-case basis, to bid on or submit a proposal for a contract with a state agency for goods or services, if it is in the best interests of the state. If you are a scrutinized company that has obtained written permission from the DGS to submit a bid or proposal, complete the information below. We are a scrutinized company as defined in Public Contract Code section 10476, but we have received written permission from the Department of General Services to submit a bid or proposal pursuant to Public Contract Code section 10477(b). A copy of the written permission from DGS is included with our bid or proposal.
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ATTACHMENT 10
SMALL BUSINESS CERTIFICATION
A Bidder desiring to claim the Small Business Preference as described in this RFP must complete this Attachment and return it with the Final proposal. All firms claimed as Small Businesses must have their complete certification information submitted to the California Department of General Services (DGS) by 5pm of the date that the Final Proposals are due.
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ATTACHMENT 11
SAMPLE STANDARD AGREEMENT
STANDARD AGREEMENT STD 213 (Rev 06/03) AGREEMENT NUMBER
REGISTRATION NUMBER
1. This Agreement is entered into between the State Agency and the Contractor named below:
STATE AGENCY'S NAME
CONTRACTOR'S NAME
SAMPLE OF STANDARD AGREEMENT 2.
The term of this through
Agreement is:
3. The maximum amount $ of this Agreement is:
4. The parties agree to comply with the terms and conditions of the following exhibits which are by this reference made a part of the Agreement.
TThe Contract is effective on the start date or upon approval by DGS which ever is later, and
no work shall begin until that time.
Exhibit A – Scope of Work Page(s) Exhibit B – Budget Detail and Payment Provisions Page(s) Exhibit C* – General Terms and Conditions Page(s) Exhibit D – Special Terms and Conditions Page(s) Exhibit E – Additional Provisions Page(s)
Items shown with an Asterisk (*), are hereby incorporated by reference and made part of this agreement as if attached hereto. These documents can be viewed at www.ols.dgs.ca.gov/Standard+Language
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto.
CONTRACTOR California Department of General Services Use Only
CONTRACTOR’S NAME (if other than an individual, state whether a corporation, partnership, etc.)
DATE SIGNED(Do not type)
PRINTED NAME AND TITLE OF PERSON SIGNING
ADDRESS
STATE OF CALIFORNIA
AGENCY NAME
BY (Authorized Signature)
DATE SIGNED(Do not type)
PRINTED NAME AND TITLE OF PERSON SIGNING Exempt per: ADDRESS
36
Exhibit A
SCOPE OF WORK
1. Contractor agrees to provide to the California Public Utilities Commission (CPUC) XXXXXXXXXXXXXX services as described herein:
2. The services shall be performed at the CPUC’s headquarters, the contractor’s office, and other places as needed in performing the services of this contract.
3. The services shall be provided during mutually agreed upon working hours.
4. The project representatives during the term of this agreement will be:
State Agency: Contractor:
Name: Name:
Phone: Phone:
Fax: Fax:
Direct all inquiries to:
State Agency : Contractor:
Section/Unit: Contracts Office Section/Unit:
Attention: Attention:
Address:
Address:
Phone: Phone:
Fax: Fax:
5. Contractor will perform the following tasks as determined to be necessary by CPUC staff and the CPUC Project Manager:
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Exhibit B
BUDGET DETAIL AND PAYMENT PROVISIONS 1. Invoicing and Payment
A. For services satisfactorily rendered, and upon receipt and approval of the invoices, the State agrees to compensate the Contractor for actual expenditures incurred in accordance with the rates specified herein, which is attached hereto and made a part of this Agreement.
B. Compensation As compensation for the satisfactory completion of the services as specified in Exhibit A, Contractor shall be entitled to a sum not to exceed $ (ENTER AMOUNT) unless the amount is increased by amendment hereto as provided in Exhibit C. Payments not to exceed this total sum shall be made as set forth in the attached schedule. Billing rates shall be as specified in Exhibit B.
C. Testifying If the CPUC directs the Contractor to testify in support of the Contractor’s work product(s), the Contractor shall be compensated for services related to the preparation and offer of testimony as described in Exhibit A at the rates specified in Attachment 1. Payment for attendance at such occasions shall be made only for those persons specified by the Commission’s Project Manager.
D. Travel and Other Expenses State will reimburse Contractor for reasonable travel expenses incurred in the performance of this Agreement. Reasonable travel expenses are defined as transportation, lodging, meals and incidental expenses in conformance with State rules and regulations. Travel expenses will be reimbursed at the same rate as provided for State management employees, as outlined in Standard Form 262. Total expenses claimed under this Agreement shall be included in the total amount encumbered ($ENTER AMOUNT) under this Agreement.
E. Invoices Invoices shall include the Agreement Number and shall be submitted in quadruplicate not more frequently than monthly in arrears to:
California Public Utilities Commission Contracts Office, 2
nd Floor
505 Van Ness Ave. San Francisco, CA 94102
ATTN: Said invoices will be subject to verification and approval by the Commission’s Contract Manager and Project Managers, and shall include the name, address, and I.D. Number of the Contractor. Invoices shall also include a summary identifying the amount claimed for each task, the category(s) of professional services as identified in Contractor’s Proposal/work plan or work order, the number of hours claimed for each task and the total claimed, a description of the labor services provided, the amount of the invoice, and an authorized Contractor signature. The invoice must also include a brief narrative progress report describing the context of the work completed during the invoice period. Travel expenses will be claimed in accordance with the regulations specified in Section 1.D above.
38
Exhibit B (cont.)
Progress payment will be made monthly, in arrears, on the basis of work performed towards completion of the contract deliverables. Ten percent (10%) retention shall be withheld from each invoice including billable hours and expenses. The retention shall become payable upon the satisfactory completion of the Agreement or at the completion of each separate task if the specific task is not a foundation for succeeding tasks leading to the completion of a finished project, report or plan.
2. Budget Contingency Clause
A. It is mutually agreed that if the Budget Act of the current year and/or any subsequent years covered under this Agreement does not appropriate sufficient funds for the program, this Agreement shall be of no further force and effect. In this event, the State shall have no liability to pay any funds whatsoever to Contractor or to furnish any other considerations under this Agreement and Contractor shall not be obligated to perform any provisions of this Agreement.
B. If funding for any fiscal year is reduced or deleted by the Budget Act for purposes of this program, the State shall have the option to either cancel this Agreement with no liability occurring to the State, or offer an agreement amendment to Contractor to reflect the reduced amount. 3. Prompt Payment Clause
Payment will be made in accordance with, and within the time specified in, Government Code Chapter 4.5,
commencing with Section 927.
39
Exhibit C
GENERAL TERMS AND CONDITIONS The General Terms and Conditions will be included in the agreement by reference to Internet site: http://www.documents.dgs.ca.gov/ols/GTC-610.doc The contract will adhere to General Terms and Conditions – 610
40
Exhibit D
SPECIAL TERMS AND CONDITIONS 1. Excise Tax
The State of California is exempt from federal excise taxes, and no payment will be made for any taxes levied on employees' wages. The State will pay for any applicable State of California or local sales or use taxes on the services rendered or equipment or parts supplied pursuant to this Agreement. California may pay any applicable sales and use tax imposed by another state.
2. Settlement of Disputes
In the event of a dispute, Contractor shall file a "Notice of Dispute" with the California Public Utilities Commission, Executive Director or designee within ten (10) days of discovery of the problem. Within ten (10) days, the Executive Director or designee shall meet with the Contractor and Project Manager for purposes of resolving the dispute. The decision of the Executive Director or designee shall be final. In the event of a dispute, the language contained within this Agreement shall prevail over any other language including that of the bid proposal.
3. Evaluation of Contractor
Performance of the Contractor under this Agreement will be evaluated. The evaluation shall be prepared on Contract/Contractor Evaluation Sheet (STD 4), and maintained in the Agreement file. For consultant agreements, a copy of the evaluation will be sent to the Department of General Services, Office of Legal Services, if it is negative and over $5,000.
4. Potential Subcontractors
Nothing contained in this Agreement or otherwise, shall create any contractual relation between the State and any subcontractors, and no subcontract shall relieve the Contractor of his responsibilities and obligations hereunder. The Contractor agrees to be as fully responsible to the State for the acts and omissions of its subcontractors and of persons either directly or indirectly employed by any of them as it is for the acts and omissions of persons directly employed by the Contractor. The Contractor's obligation to pay its subcontractors is an independent obligation from the State's obligation to make payments to the Contractor. As a result, the State shall have no obligation to pay or to enforce the payment of any moneys to any subcontractor.
5. DVBE SB548 – Replacement of Disabled Veteran Business Enterprise Subcontractors
Contractor understands and agrees that should award of this contract be based in part on their commitment to use the Disabled Veteran Business Enterprise (DVBE) subcontractor(s) identified in their bid or offer, per military and Veterans Code 999.5 (e), a DVBE subcontractor may only be replaced by another DVBE subcontractor and must be approved by the Department of General Services (DGS). Changes to the scope of work that impact the DVBE subcontractor(S) identified in the bid or offer and approved DVBE substitutions will be documented by contract amendment.
Failure of Contractor to seek substitution and adhere to the DVBE participation level identified in the bid or offer may be
cause for contract termination, recovery of damages under rights and remedies due to State, and penalties as outlined in M&VC § 999.9; Public Contract Code (PCC) § 10115.10, or PCC § 4110 (applies to public works only).
41
Exhibit E
ADDITIONAL PROVISIONS 1. Consultant - Staff Expenses
The Contractor represents that it has or shall secure at its own expense, all staff required to perform the services described in this Agreement. Such personnel shall not be employees of or have any contractual relationship with any governmental entity.
2. Subcontracts
Contractor shall submit any proposed subcontracts to the State for its written approval before entering into the same. No work shall be subcontracted without the prior approval of the State. Upon termination of any sub-contract, the State shall be notified immediately. If the terminated subcontractor is a DVBE, the contractor must replace the subcontractor within the same participation category and such replacement must be approved by the Commission. Failure to adhere to DVBE Participation may be cause for contract termination and recovery of damages under the rights and remedies due the state under the default section of the contract. The Agreement shall permit the State to audit the Contractor to verify compliance with DVBE regulations.
3. Relationship with Contractor and Subcontractor
Contractor shall be responsible for all actions of subcontractors and all payment to subcontractors. Failure of a subcontractor to perform for any reason shall not relieve Contractor of the responsibility for competent and timely performance of duties under this contract. Commission staff will not deal with subcontractors except through Contractor’s Project Manager. All requests for changes of work within this contract shall be in writing between the Project Manager for Commission and the Project Manager for Contractor.
4. Commission Staff
Commission staff will be permitted to work side by side with Contractor’s staff to the extent and under conditions directed by the Commission’s Project Manager. In this connection, Commission staff will be given access to all data, working papers, etc., which Contractor may seek to utilize.
5. Use of State Personnel
Contractor will not be permitted to use State personnel for the performance of services which are the responsibility of Contractor unless such use is previously agreed to in writing by the Commission’s Project Manager, and an appropriate adjustment in price is made. No charge will be made to contractor for the services of State employees performing coordination or monitoring functions.
6. Changes in Time for Performance of Tasks
The time for performance of tasks and items within the budget, but not the total contract price, may be changed by written approval of the Commission’s Project Manager. However, the date for completion, the total contract price, and scope, as well as, all other terms may be altered only by formal amendment of this contract.
42
Exhibit E (cont.)
7. Change of Personnel
Contractor and Subcontractor’s key personnel as indicated in the attached resumes may not be substituted without the Commission’s Contract Manager’s prior written approval.
8. Ownership of Data
Data developed for this contract shall become the property of the State. It shall not be disclosed without the permission of the Commission’s Project Manager. Each report shall also become the property of the State and shall not be disclosed except in such manner and such time as the Commission’s Project Manager may direct, with the exception of data which have become part of the public records of the State, as discussed in Paragraph 9.
9. Confidentiality of Data/Nondisclosure Agreement
The Consultant (“Signatory”), by signing this Agreement agrees to perform the task(s) under this Agreement. The signatory recognizes that it must have full and unfettered access to information and documents within the knowledge and possession of various entities under the regulatory jurisdiction of the Commission. The Signatory also recognizes that some of this information may be proprietary, confidential, or privileged in nature. The Signatory further recognizes that the Commission Staff has broad statutory authority to compel the production of such information subject to the provisions of Public Utilities Code 583 and General Order 66-C. The Signatory understands that these legal provisions generally preclude public disclosure of information obtained in confidence except during the course of a public hearing or with permission of the Commission. The Signatory acknowledges that it has received a copy and read Public Utilities Code Section 583 and General Order 66-C, and agrees to be subject to and to fully comply with these legal provisions in discharging its responsibilities. Such compliance includes abiding by the terms of prohibiting public disclosure of confidential information and submitting to the jurisdiction of the Commission for the purposes of enforcing Public Utilities Code Section 583. The Signatory further recognizes that much of the information obtained during the course of its work for the Commission may be subject to other privileges for nondisclosure, and may not be disclosed without the consent of the Commission or its Staff who include, but are not limited to, attorney work product privilege, the official information privilege, the attorney-client privilege, and other prohibitions precluding disclosure of confidential information. The Signatory agrees not to disclose any information regarding its work to third parties except with the Commission Staff’s express written consent, and to return all documents obtained during the course of the Agreement. The signatory agrees to notify the Commission Staff of any inquires and/or request for disclosure from any such third parties. The Signatory will not comment publicly to the press or any other media regarding its work, or the Commission’s action on the same, except to the Commission Staff, Signatory’s own personnel and/or subcontractors involved in the completion of tasks under this agreement, or at a public hearing, or in response to questions from a legislative committee. In addition, the Signatory agrees that prior to commencement of any work associated with this Agreement, the signatory shall: (1) provide a copy of this section of the Agreement, Public Utilities
43
Exhibit E (cont.)
Code Section 583 and General Order 66-C to all who will be performing tasks under this Agreement; and (2) inform all those working under this Agreement that they are such to these legal provisions and must comply with Confidentiality of Data Agreement/Nondisclosure Section. Ninety days after any document submitted has become a part of the public records of the State, Signatory may at its own expense, publish or utilize the same but shall include the following legend:
LEGAL NOTICE This report was prepared as an account of work sponsored by the California Public Utilities Commission. It does not necessarily represent the views of the Commission or any of its employees except to the extent, if any, that it has formally been approved by the Commission at a public meeting. For information regarding any such action, communicate directly with the Commission at 505 Van Ness Avenue, San Francisco, California 94102. Neither the Commission nor the State of California, nor any officer, employee, or any of its contractors or subcontractors makes any warranty, express or implied, or assumes any legal liability whatsoever for the contents of this document.
10. Termination-Bankruptcy
In the event proceedings in bankruptcy are commenced against the Contractor, it is adjudged bankrupt, or a receiver is appointed and qualifies, the State may terminate this agreement by giving five days’ notice in writing to the Contractor.
11. Termination at State’s Option
State may at its option terminate this contract, with or without cause, at any time upon giving 30 days notice in writing to Contractor. In such event, Contractor agrees to use all reasonable efforts to mitigate its expenses and obligations hereunder. In such event, State shall pay Contractor for all satisfactory services rendered prior to such notice of termination and for all expenses incurred by Contractor prior to said termination which are not included in charges for service rendered prior to termination and which could not by reasonable efforts of Contractor have been avoided.
12. Termination in Event of Breach
In the event of any breach of this contract, the State may without any prejudices to any of its other legal remedies terminate this contract upon five days’ written notice to the Contractor.
13. Waiver
No waiver of any breach of this contract shall be held to be a waiver of any other or subsequent breach. All remedies afforded in this contract shall be taken and construed as cumulative: that is, in addition to every other remedy provided herein or by law. The failure of State to enforce at any time any of the provisions of this agreement, or to require at any time performance by Contractor of any of the provisions thereof, shall in no way be construed to be a waiver of such provision nor in any way to affect the validity of this agreement or any part thereof or the right of State to thereafter enforce each and every such provision.
44
Exhibit E (cont.)
14. Gratuities
A. The State may, by written notice to the Contractor, terminate the right of Contractor to proceed under this contract if it is found, after notice and hearing by the State or by Executive Director of the Public Utilities Commission or duly authorized representative, that gratuities were offered or given by the Contractor, or any agent or representative of the Contractor, to any officer or employee of the State with a view toward securing a contract, securing favorable treatment with respect to award amendment, or the evaluation of performance of such contract, provided that the facts upon which either the Commission or the Executive Director makes such findings may be reviewed in any competent court.
B. In the event this contract is terminated as provided in paragraph 14(A), State shall be entitled (i) to pursue the same
remedies against Contractor as it could pursue in the event of the breach of the contract by the Contractor, and (ii) to a penalty in addition to any other damages to which it may be entitled by law, and to exemplary damages in an amount which shall be not less than three nor more than ten times the cost incurred by the Contractor in providing any such gratuities to any such officer or employee.
The rights and remedies of State provided in this clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this contract.
15. Conflict of Interest
Contractor agrees to refrain from entering into any relationship which could result in a conflict of interest in the performance of this Agreement; and to notify the Commission’s Project Manager promptly of any potential conflict of interest, including subcontractors. The Commission may exercise its option to terminate this Agreement if a conflict is found.
16. Agreement is Complete
Other than as specified herein, no document or communication passing between the parties hereto shall be deemed a part of this Agreement.
17. Captions
The clause headings appearing in this agreement have been inserted for the purpose of convenience and ready reference. They do not purport to and shall not be deemed to define, limit, or extend the scope or intent to the clauses to which they appertain.
18. Force Majeure
Neither party shall be liable to the other for any delay in or failure of performance, nor shall any such delay in or failure of performance constitutes default, if such delay or failure is caused by “Force Majeure.” As used in this section, “Force Majeure” is defined as follows: Acts of war and acts of god such as earthquakes, floods and other natural disasters such that performance is impossible.
19. Counterparts (OPTIONAL) For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto. Each such counterpart shall, and shall be deemed to be, an original instrument, but all such counterparts taken together shall constitute one and the same agreement.
45
ATTACHMENT 12
AFFILIATE TRANSACTION RULES
APPLICABLE TO LARGE CALIFORNIA ENERGY UTILITIES
APPENDIX A-3
Affiliate Transaction Rules Applicable to Large California Energy Utilities
Table of Contents Title Page I. Definitions................................................................................................................... 1
A. “Affiliate” ............................................................................................................... 1
B. “Commission”......................................................................................................... 2
C. “Customer” ............................................................................................................. 2
D. “Customer Information” ......................................................................................... 2
E. ”FERC”................................................................................................................... 2
F. “Fully Loaded Cost” ............................................................................................... 2
G. “Utility”................................................................................................................... 2
H. “Resource Procurement”......................................................................................... 2
II. Applicability ............................................................................................................... 3
A. Untitled ................................................................................................................... 3
B. Untitled ................................................................................................................... 3
C. Untitled ................................................................................................................... 3
D. Untitled ................................................................................................................... 4
E. Untitled ................................................................................................................... 4
F. Existing Rules ......................................................................................................... 4
G. Civil Relief.............................................................................................................. 4
H. Untitled ................................................................................................................... 4
III. Nondiscrimination....................................................................................................... 5
A. No Preferential Treatment Regarding Services Provided by the Utility................. 5
B. Affiliate Transactions.............................................................................................. 5
C. Tying of Services Provided by a Utility Prohibited................................................ 7
D. No Assignment of Customers ................................................................................. 7
E. Business Development and Customer Relations .................................................... 7
F. Affiliate Discount Reports ...................................................................................... 7
IV. Disclosure and Information......................................................................................... 9
A. Customer Information............................................................................................. 9
B. Non-Customer Specific Non-Public Information ................................................... 9
C. Service Provider Information.................................................................................. 9
D. Supplier Information............................................................................................... 9
E. Affiliate-Related Advice or Assistance ................................................................ 10
F. Record-Keeping .................................................................................................... 10
G. Maintenance of Affiliate Contracts and Related Bids .......................................... 10
H. FERC Reporting Requirements ............................................................................ 10
V. Separation ................................................................................................................. 10
A. Corporate Entities ................................................................................................. 10
B. Books and Records ............................................................................................... 11
46
C. Sharing of Plant, Facilities, Equipment or Costs .................................................. 11
D. Joint Purchases...................................................................................................... 11
i
APPENDIX A-3
Table of Contents (Continued) Title Page E. Corporate Support................................................................................................. 12
F. Corporate Identification and Advertising ............................................................. 13
G. Employees............................................................................................................. 14
H. Transfer of Goods and Services............................................................................ 17
VI. Regulatory Oversight................................................................................................ 17
A. Compliance Plans.................................................................................................. 17
B. New Affiliate Compliance Plans .......................................................................... 18
C. Affiliate Audit....................................................................................................... 18
D. Witness Availability.............................................................................................. 18
E. Officer Certification.............................................................................................. 19
VII. Utility Products and Services.................................................................................... 19
A. General Rule ......................................................................................................... 19
B. Definitions............................................................................................................. 19
C. Utility Products and Services................................................................................ 20
D. Conditions Precedent to Offering New Products and Services ............................ 20
E. Requirement to File an Advice Letter................................................................... 21
F. Existing Offerings................................................................................................. 22
G. Section 851 Application........................................................................................ 23
H. Periodic Reporting of Nontariffed Products and Services.................................... 23
I. Offering of Nontariffed Products and Services to Affiliates ................................ 23
VIII. Complaint Procedures and Remedies ..................................................................... 24
A. Untitled ................................................................................................................. 24
B. Standing ................................................................................................................ 24
C. Procedure .............................................................................................................. 24
D. Remedies............................................................................................................... 27
IX. Protecting the Utility’s Financial Health .................................................................. 31
A. Information from Utility on Necessary Capital .................................................... 31
B. Restrictions on Deviations from Authorized Capital Structure ............................ 32
C. Ring-Fencing......................................................................................................... 32
D. Changes to Ring-Fencing Provisions.................................................................... 33
ii
APPENDIX A-3
Affiliate Transaction Rules Applicable to Large California Energy Utilities I. Definitions
Unless the context otherwise requires, the following definitions govern the
construction of these Rules:
A. “Affiliate” means any person, corporation, utility, partnership, or
other entity 5 per cent or more of whose outstanding securities are
47
owned, controlled, or held with power to vote, directly or indirectly
either by a utility or any of its subsidiaries, or by that utility’s
controlling corporation and/or any of its subsidiaries as well as any
company in which the utility, its controlling corporation, or any of the
utility’s affiliates exert substantial control over the operation of the
company and/or indirectly have substantial financial interests in the
company exercised through means other than ownership. For
purposes of these Rules, “substantial control” includes, but is not
limited to, the possession, directly or indirectly and whether acting
alone or in conjunction with others, of the authority to direct or cause
the direction of the management or policies of a company. A direct or
indirect voting interest of 5% or more by the utility in an entity’s
company creates a rebuttable presumption of control.
For purposes of this Rule, “affiliate” shall include the utility’s parent or
holding company, or any company which directly or indirectly owns,
controls, or holds the power to vote 10% or more of the outstanding
voting securities of a utility (holding company), to the extent the
holding company is engaged in the provision of products or services as
set out in Rule II B. However, in its compliance plan filed pursuant to
Rule VI, the utility shall demonstrate both the specific mechanism and
procedures that the utility and holding company have in place to
assure that the utility is not utilizing the holding company or any of its
affiliates not covered by these Rules as a conduit to circumvent any of
these Rules. Examples include but are not limited to specific
mechanisms and procedures to assure the Commission that the utility
will not use the holding company, another utility affiliate not covered
by these Rules, or a consultant or contractor as a vehicle to (1)
disseminate information transferred to them by the utility to an
affiliate covered by these Rules in contravention of these Rules, (2)
provide services to its affiliates covered by these Rules in
contravention of these Rules or (3) to transfer employees to its affiliates
1
APPENDIX A-3
covered by these Rules in contravention of these Rules. In the
compliance plan, a corporate officer from the utility and holding
company shall verify the adequacy of these specific mechanisms and
procedures to ensure that the utility is not utilizing the holding
company or any of its affiliates not covered by these Rules as a conduit
to circumvent any of these Rules. Regulated subsidiaries of a utility,
defined as subsidiaries of a utility, the revenues and expenses of which
are subject to regulation by the Commission and are included by the
Commission in establishing rates for the utility, are not included
within the definition of affiliate. However, these Rules apply to all
interactions any regulated subsidiary has with other affiliated entities
covered by these rules.
B. “Commission” means the California Public Utilities Commission or its
succeeding state regulatory body.
48
C. “Customer” means any person or corporation, as defined in Sections
204, 205 and 206 of the California Public Utilities Code, that is the
ultimate consumer of goods and services.
D. “Customer Information” means non-public information and data
specific to a utility customer which the utility acquired or developed in
the course of its provision of utility services.
E. ”FERC” means the Federal Energy Regulatory Commission.
F. “Fully Loaded Cost” means the direct cost of good or service plus all
applicable indirect charges and overheads.
G. “Utility” means any public utility subject to the jurisdiction of the
Commission as an Electrical Corporation or Gas Corporation, as
defined in California Public Utilities Code Sections 218 and 222, and
with gross annual operating revenues in California of $1 billion or
more.
H. “Resource Procurement” means the investment in and the production
or acquisition of the energy facilities, supplies, and other energy
products or services necessary for California public utility gas
corporations and California public utility electrical corporations to
meet their statutory obligation to serve their customers.
2
APPENDIX A-3
II. Applicability A. These Rules shall apply to California public utility gas corporations
and California public utility electrical corporations, subject to
regulation by the California Public Utilities Commission and with
gross annual operating revenues in California of $1 billion or more.
B. For purposes of a combined gas and electric utility, these Rules apply
to all utility transactions with affiliates engaging in the provision of a
product that uses gas or electricity or the provision of services that
relate to the use of gas or electricity, unless specifically exempted
below. For purposes of an electric utility, these Rules apply to all
utility transactions with affiliates engaging in the provision of a
product that uses electricity or the provision of services that relate to
the use of electricity. For purposes of a gas utility, these Rules apply to
all utility transactions with affiliates engaging in the provision of a
product that uses gas or the provision of services that relate to the use
of gas. However, regardless of the foregoing, where explicitly
provided, these Rules also apply to a utility’s parent holding company
and to all of its affiliates, whether or not they engage in the provision
of a product that uses gas or electricity or the provision of services that
relate to the use of gas or electricity.
C. No holding company nor any utility affiliate, whether or not engaged
in the provision of a product that uses gas or electricity or the
provision of services that relate to the use of gas or electricity, shall
knowingly:
1. direct or cause a utility to violate or circumvent these Rules,
including but not limited to the prohibitions against the utility
49
providing preferential treatment, unfair competitive advantages or
non-public information to its affiliates;
2. aid or abet a utility’s violation of these Rules; or
3. be used as a conduit to provide non-public information to a utility's
affiliate.
3
APPENDIX A-3
D. These Rules apply to transactions between a Commission-regulated
utility and another affiliated utility, unless specifically modified by the
Commission in addressing a separate application to merge or
otherwise conduct joint ventures related to regulated services.
E. These Rules do not apply to the exchange of operating information,
including the disclosure of customer information to its FERC-regulated
affiliate to the extent such information is required by the affiliate to
schedule and confirm nominations for the interstate transportation of
natural gas, between a utility and its FERC-regulated affiliate, to the
extent that the affiliate operates an interstate natural gas pipeline.
These Rules do not apply to transactions between an electric utility
and an affiliate providing broadband over power lines (BPL).
F. Existing Rules: Existing Commission rules for each utility and its
parent holding company shall continue to apply except to the extent
they conflict with these Rules. In such cases, these Rules shall
supersede prior rules and guidelines, provided that nothing herein
shall supersede the Commission’s regulatory framework for
broadband over power lines (BPL) adopted in D. 06-04-070 nor shall
preclude (1) the Commission from adopting other utility-specific
guidelines; or (2) a utility or its parent holding company from
adopting other utility-specific guidelines, with advance Commission
approval.
G. Civil Relief: These Rules shall not preclude or stay any form of civil
relief, or rights or defenses thereto, that may be available under state
or federal law.
H. These Rules should be interpreted broadly, to effectuate our stated
objectives of fostering competition and protecting consumer interests.
If any provision of these Rules, or the application thereof to any
person, company, or circumstance, is held invalid, the remainder of the
Rules, or the application of such provision to other persons,
companies, or circumstances, shall not be affected thereby.
4
APPENDIX A-3
III. Nondiscrimination A. No Preferential Treatment Regarding Services Provided by the
Utility: Unless otherwise authorized by the Commission or the FERC,
or permitted by these Rules, a utility shall not:
1. represent that, as a result of the affiliation with the utility, its
affiliates or customers of its affiliates will receive any different
treatment by the utility than the treatment the utility provides to
50
other, unaffiliated companies or their customers; or
2. provide its affiliates, or customers of its affiliates, any preference
(including but not limited to terms and conditions, pricing, or
timing) over non-affiliated suppliers or their customers in the
provision of services provided by the utility.
B. Affiliate Transactions: Transactions between a utility and its affiliates
shall be limited to tariffed products and services, to the sale of goods,
property, products or services made generally available by the utility
or affiliate to all market participants through an open, competitive
bidding process, to the provision of information made generally
available by the utility to all market participants, to Commissionapproved
resource procurement by the utility, or as provided for in
Rules V D (joint purchases), V E (corporate support) and VII (new
products and services) below.
1. Resource Procurement. No utility shall engage in resource
procurement, as defined in these Rules, from an affiliate without
prior approval from the Commission. Blind transactions between a
utility and its affiliate, defined as those transactions in which
neither party knows the identity of the counterparty until the
transaction is consummated, are exempted from this Rule. A
transaction shall be deemed to have prior Commission approval (a)
before the effective date of this Rule, if authorized by the
Commission specifically or through the delegation of authority to
Commission staff or (b) after the effective date of this Rule, if
authorized by the Commission generally or specifically or through
the delegation of authority to Commission staff.
2. Provision of Supply, Capacity, Services or Information: Except as
provided for in Rules V D, V E, and VII, a utility shall provide
access to utility information, services, and unused capacity or
5
APPENDIX A-3
supply on the same terms for all similarly situated market
participants. If a utility provides supply, capacity, services, or
information to its affiliate(s), it shall contemporaneously make the
offering available to all similarly situated market participants,
which include all competitors serving the same market as the
utility’s affiliates.
3. Offering of Discounts: Except when made generally available by
the utility through an open, competitive bidding process, if a utility
offers a discount or waives all or any part of any other charge or fee
to its affiliates, or offers a discount or waiver for a transaction in
which its affiliates are involved, the utility shall
contemporaneously make such discount or waiver available to all
similarly situated market participants. The utilities should not use
the “similarly situated” qualification to create such a unique
discount arrangement with their affiliates such that no competitor
could be considered similarly situated. All competitors serving the
51
same market as the utility’s affiliates should be offered the same
discount as the discount received by the affiliates. A utility shall
document the cost differential underlying the discount to its
affiliates in the affiliate discount report described in Rule III F 7
below.
4. Tariff Discretion: If a tariff provision allows for discretion in its
application, a utility shall apply that tariff provision in the same
manner to its affiliates and other market participants and their
respective customers.
5. No Tariff Discretion: If a utility has no discretion in the application
of a tariff provision, the utility shall strictly enforce that tariff
provision.
6. Processing Requests for Services Provided by the Utility: A utility
shall process requests for similar services provided by the utility in
the same manner and within the same time for its affiliates and for
all other market participants and their respective customers.
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APPENDIX A-3
C. Tying of Services Provided by a Utility Prohibited: A utility shall not
condition or otherwise tie the provision of any services provided by
the utility, nor the availability of discounts of rates or other charges or
fees, rebates, or waivers of terms and conditions of any services
provided by the utility, to the taking of any goods or services from its
affiliates.
D. No Assignment of Customers: A utility shall not assign customers to
which it currently provides services to any of its affiliates, whether by
default, direct assignment, option or by any other means, unless that
means is equally available to all competitors.
E. Business Development and Customer Relations: Except as otherwise
provided by these Rules, a utility shall not:
1. provide leads to its affiliates;
2. solicit business on behalf of its affiliates;
3. acquire information on behalf of or to provide to its affiliates;
4. share market analysis reports or any other types of proprietary or
nonpublicly available reports, including but not limited to market,
forecast, planning or strategic reports, with its affiliates;
5. request authorization from its customers to pass on customer
information exclusively to its affiliates;
6. give the appearance that the utility speaks on behalf of its affiliates
or that the customer will receive preferential treatment as a
consequence of conducting business with the affiliates; or
7. give any appearance that the affiliate speaks on behalf of the utility.
F. Affiliate Discount Reports: If a utility provides its affiliates a
discount, rebate, or other waiver of any charge or fee associated with
products or services provided by the utility, the utility shall, within 24
hours of the time at which the product or service provided by the
utility is so provided, post a notice on its electronic bulletin board
52
providing the following information:
1. the name of the affiliate involved in the transaction;
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APPENDIX A-3
2. the rate charged;
3. the maximum rate;
4. the time period for which the discount or waiver applies;
5. the quantities involved in the transaction;
6. the delivery points involved in the transaction;
7. any conditions or requirements applicable to the discount or
waiver, and a documentation of the cost differential underlying the
discount as required in Rule III B 2 above; and
8. procedures by which a nonaffiliated entity may request a
comparable offer.
A utility that provides an affiliate a discounted rate, rebate, or other
waiver of a charge or fee associated with services provided by the utility
shall maintain, for each billing period, the following information:
9. the name of the entity being provided services provided by the
utility in the transaction;
10. the affiliate’s role in the transaction (i.e., shipper, marketer,
supplier, seller);
11. the duration of the discount or waiver;
12. the maximum rate;
13. the rate or fee actually charged during the billing period; and
14. the quantity of products or services scheduled at the discounted
rate during the billing period for each delivery point.
All records maintained pursuant to this provision shall also conform to
FERC rules where applicable.
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APPENDIX A-3
IV. Disclosure and Information A. Customer Information: A utility shall provide customer information
to its affiliates and unaffiliated entities on a strictly non-discriminatory
basis, and only with prior affirmative customer written consent.
B. Non-Customer Specific Non-Public Information: A utility shall make
non-customer specific non-public information, including but not
limited to information about a utility’s natural gas or electricity
purchases, sales, or operations or about the utility’s gas-related goods
or services and electricity-related goods or services, available to the
utility’s affiliates only if the utility makes that information
contemporaneously available to all other service providers on the same
terms and conditions, and keeps the information open to public
inspection. Unless otherwise provided by these Rules, a utility
continues to be bound by all Commission-adopted pricing and
reporting guidelines for such transactions. A utility is also permitted to
exchange proprietary information on an exclusive basis with its
affiliates, provided the utility follows all Commission-adopted pricing
53
and reporting guidelines for such transactions, and it is necessary to
exchange this information in the provision of the corporate support
services permitted by Rule V E below. The affiliate’s use of such
proprietary information is limited to use in conjunction with the
permitted corporate support services, and is not permitted for any
other use. Nothing in this Rule precludes the exchange of information
pursuant to D.97-10-031. Nothing in this Rule is intended to limit the
Commission’s right to information under Public Utilities Code Sections
314 and 581.
C. Service Provider Information: Except upon request by a customer or
as otherwise authorized by the Commission or another governmental
body, a utility shall not provide its customers with any list of service
providers, which includes or identifies the utility’s affiliates, regardless
of whether such list also includes or identifies the names of unaffiliated
entities.
D. Supplier Information: A utility may provide non-public information
and data which has been received from unaffiliated suppliers to its
affiliates or non-affiliated entities only if the utility first obtains written
affirmative authorization to do so from the supplier. A utility shall not
actively solicit the release of such information exclusively to its own
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APPENDIX A-3
affiliate in an effort to keep such information from other unaffiliated
entities.
E. Affiliate-Related Advice or Assistance: Except as otherwise provided
in these Rules, a utility shall not offer or provide customers advice or
assistance with regard to its affiliates or other service providers.
F. Record-Keeping: A utility shall maintain contemporaneous records
documenting all tariffed and nontariffed transactions with its affiliates,
including but not limited to, all waivers of tariff or contract provisions,
all discounts, and all negotiations of any sort between the utility and
its affiliate whether or not they are consummated. A utility shall
maintain such records for a minimum of three years and longer if this
Commission or another government agency so requires. For
consummated transactions, the utility shall make such final transaction
documents available for third party review upon 72 hours’ notice, or at
a time mutually agreeable to the utility and third party.
If D.97-06-110 is applicable to the information the utility seeks to
protect, the utility should follow the procedure set forth in D.97-06-
110, except that the utility should serve the third party making the
request in a manner that the third party receives the utility’s D.97-06-
110 request for confidentiality within 24 hours of service.
G. Maintenance of Affiliate Contracts and Related Bids: A utility shall
maintain a record of all contracts and related bids for the provision of
work, products or services between the utility and its affiliates for no
less than a period of three years, and longer if this Commission or
another government agency so requires.
54
H. FERC Reporting Requirements: To the extent that reporting rules
imposed by the FERC require more detailed information or more
expeditious reporting, nothing in these Rules shall be construed as
modifying the FERC rules.
V. Separation A. Corporate Entities: A utility, its parent holding company, and its
affiliates shall be separate corporate entities.
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APPENDIX A-3
B. Books and Records: A utility, its parent holding company, and its
affiliates shall keep separate books and records.
1. Utility books and records shall be kept in accordance with
applicable Uniform System of Accounts (USOA) and Generally
Accepted Accounting Procedures (GAAP).
2. The books and records of a utility’s parent holding company and
affiliates shall be open for examination by the Commission and its
staff consistent with the provisions of Public Utilities Code Sections
314 and 701, the conditions in the Commission's orders authorizing
the utilities' holding companies and/or mergers and these Rules.
C. Sharing of Plant, Facilities, Equipment or Costs: A utility shall not
share office space, office equipment, services, and systems with its
affiliates, nor shall a utility access the computer or information systems
of its affiliates or allow its affiliates to access its computer or
information systems, except to the extent appropriate to perform
shared corporate support functions permitted under Rule V E of these
Rules. Physical separation required by this rule shall be accomplished
preferably by having office space in a separate building, or, in the
alternative, through the use of separate elevator banks and/or
security-controlled access. This provision does not preclude a utility
from offering a joint service provided this service is authorized by the
Commission and is available to all non-affiliated service providers on
the same terms and conditions (e.g., joint billing services pursuant to
D.97-05-039).
D. Joint Purchases: To the extent not precluded by any other Rule, the
utilities and their affiliates may make joint purchases of good and
services, but not those associated with the traditional utility merchant
function. For purpose of these Rules, to the extent that a utility is
engaged in the marketing of the commodity of electricity or natural
gas to customers, as opposed to the marketing of transmission and
distribution services, it is engaging in merchant functions. Examples of
permissible joint purchases include joint purchases of office supplies
and telephone services. Examples of joint purchases not permitted
include gas and electric purchasing for resale, purchasing of gas
transportation and storage capacity, purchasing of electric
transmission, systems operations, and marketing. The utility must
insure that all joint purchases are priced, reported, and conducted in a
manner that permits clear identification of the utility and affiliate
55
11
APPENDIX A-3
portions of such purchases, and in accordance with applicable
Commission allocation and reporting rules.
E. Corporate Support: As a general principle, a utility, its parent holding
company, or a separate affiliate created solely to perform corporate
support services may share with its affiliates joint corporate oversight,
governance, support systems and personnel, as further specified
below. Any shared support shall be priced, reported and conducted in
accordance with the Separation and Information Standards set forth
herein, as well as other applicable Commission pricing and reporting
requirements.
As a general principle, such joint utilization shall not allow or provide
a means for the transfer of confidential information from the utility to
the affiliate, create the opportunity for preferential treatment or unfair
competitive advantage, lead to customer confusion, or create
significant opportunities for cross-subsidization of affiliates. In the
compliance plan, a corporate officer from the utility and holding
company shall verify the adequacy of the specific mechanisms and
procedures in place to ensure the utility follows the mandates of this
paragraph, and to ensure the utility is not utilizing joint corporate
support services as a conduit to circumvent these Rules.
Examples of services that may be shared include: payroll, taxes,
shareholder services, insurance, financial reporting, financial planning
and analysis, corporate accounting, corporate security, human
resources (compensation, benefits, employment policies), employee
records, regulatory affairs, lobbying, legal, and pension management.
However, if a utility and its parent holding company share any key
officers after 180 days following the effective date of the decision
adopting these Rule modifications, then the following services shall no
longer be shared: regulatory affairs, lobbying, and all legal services
except those necessary to the provision of shared services still
authorized. For purposes of this Rule, key officers are the Chair of the
entire corporate enterprise, the President at the utility and at its
holding company parent, the chief executive officer at each, the chief
financial officer at each, and the chief regulatory officer at each, or in
each case, any and all officers whose responsibilities are the functional
equivalent of the foregoing.
Examples of services that may not be shared include: employee
recruiting, engineering, hedging and financial derivatives and
arbitrage services, gas and electric purchasing for resale, purchasing of
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APPENDIX A-3
gas transportation and storage capacity, purchasing of electric
transmission, system operations, and marketing. However, if a utility
and its parent holding company share any key officers (as defined in
the preceding paragraph) after 180 days following the effective date of
56
the decision adopting these Rule modifications, then the following
services shall no longer be shared: regulatory affairs, lobbying, and all
legal services except those necessary to the provision of shared services
still authorized.
F. Corporate Identification and Advertising:
1. A utility shall not trade upon, promote, or advertise its affiliate’s
affiliation with the utility, nor allow the utility name or logo to be
used by the affiliate or in any material circulated by the affiliate,
unless it discloses in plain legible or audible language, on the first
page or at the first point where the utility name or logo appears
that:
a. the affiliate “is not the same company as [i.e. PG&E, Edison, the
Gas Company, etc.], the utility,”;
b. the affiliate is not regulated by the California Public Utilities
Commission; and
c. “you do not have to buy [the affiliate’s] products in order to
continue to receive quality regulated services from the utility.”
The application of the name/logo disclaimer is limited to the
use of the name or logo in California.
2. A utility, through action or words, shall not represent that, as a result
of the affiliate’s affiliation with the utility, its affiliates will receive any
different treatment than other service providers.
3. A utility shall not offer or provide to its affiliates advertising space in
utility billing envelopes or any other form of utility customer written
communication unless it provides access to all other unaffiliated
service providers on the same terms and conditions.
4. A utility shall not participate in joint advertising or joint marketing
with its affiliates. This prohibition means that utilities may not engage
in activities which include, but are not limited to the following:
13
APPENDIX A-3
a. A utility shall not participate with its affiliates in joint sales calls,
through joint call centers or otherwise, or joint proposals (including
responses to requests for proposals (RFPs)) to existing or potential
customers. At a customer’s unsolicited request, a utility may
participate, on a nondiscriminatory basis, in non-sales meetings
with its affiliates or any other market participant to discuss
technical or operational subjects regarding the utility’s provision of
transportation service to the customer;
b. Except as otherwise provided for by these Rules, a utility shall
not participate in any joint activity with its affiliates. The term
“joint activities” includes, but is not limited to, advertising, sales,
marketing, communications and correspondence with any existing
or potential customer;
c. A utility shall not participate with its affiliates in trade shows,
conferences, or other information or marketing events held in
California.
57
5. A utility shall not share or subsidize costs, fees, or payments with its
affiliates associated with research and development activities or
investment in advanced technology research.
G. Employees:
1. Except as permitted in Rule V E (corporate support), a utility and its
affiliates shall not jointly employ the same employees, This Rule
prohibiting joint employees also applies to Board Directors, and
corporate officers except for the following circumstances: In instances
when this Rule is applicable to holding companies, any board member
or corporate officer may serve on the holding company and with either
the utility or affiliate (but not both) to the extent consistent with Rule V
E (corporate support). Where the utility is a multi-state utility, is not a
member of a holding company structure, and assumes the corporate
governance functions for the affiliates, the prohibition against any
board member or corporate officer of the utility also serving as a board
member or corporate officer of an affiliate shall only apply to affiliates
that operate within California. In the case of shared directors and
officers, a corporate officer from the utility and holding company shall
describe and verify in the utility’s compliance plan required by Rule VI
the adequacy of the specific mechanisms and procedures in place to
ensure that the utility is not utilizing shared officers and directors as a
conduit to circumvent any of these Rules. In its compliance plan, the
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APPENDIX A-3
utility shall list all shared directors and officers between the utility and
affiliates. No later than 30 days following a change to this list, the
utility shall notify the Commission’s Energy Division and the parties
on the service list of R.97-04-011/I.97-04-012 of any change to this list.
2. All employee movement between a utility and its affiliates shall be
consistent with the following provisions:
a. A utility shall track and report to the Commission all employee
movement between the utility and affiliates. The utility shall report
this information annually pursuant to our Affiliate Transaction
Reporting Decision, D.93-02-016, 48 CPUC2d 163, 171-172 and 180
(Appendix A, Section I and Section II H.).
b. Once an employee of a utility becomes an employee of an affiliate,
the employee may not return to the utility for a period of one year.
This Rule is inapplicable if the affiliate to which the employee
transfers goes out of business during the one-year period. In the
event that such an employee returns to the utility, such employee
cannot be retransferred, reassigned, or otherwise employed by the
affiliate for a period of two years. Employees transferring from the
utility to the affiliate are expressly prohibited from using
information gained from the utility in a discriminatory or exclusive
fashion, to the benefit of the affiliate or to the detriment of other
unaffiliated service providers.
c. When an employee of a utility is transferred, assigned, or otherwise
58
employed by the affiliate, the affiliate shall make a one-time
payment to the utility in an amount equivalent to 25% of the
employee’s base annual compensation, unless the utility can
demonstrate that some lesser percentage (equal to at least 15%) is
appropriate for the class of employee included. In the limited case
where a rank-and-file (non-executive) employee’s position is
eliminated as a result of electric industry restructuring, a utility
may demonstrate that no fee or a lesser percentage than 15% is
appropriate. All such fees paid to the utility shall be accounted for
in a separate memorandum account to track them for future
ratemaking treatment (i.e. credited to the Electric Revenue
Adjustment Account or the Core and Noncore Gas Fixed Cost
Accounts, or other ratemaking treatment, as appropriate), on an
annual basis, or as otherwise necessary to ensure that the utility’s
ratepayers receive the fees. This transfer payment provision will
not apply to clerical workers. Nor will it apply to the initial transfer
15
APPENDIX A-3
of employees to the utility’s holding company to perform corporate
support functions or to a separate affiliate performing corporate
support functions, provided that that transfer is made during the
initial implementation period of these rules or pursuant to a § 851
application or other Commission proceeding. However, the rule
will apply to any subsequent transfers or assignments between a
utility and its affiliates of all covered employees at a later time.
d. Any utility employee hired by an affiliate shall not remove or
otherwise provide information to the affiliate which the affiliate
would otherwise be precluded from having pursuant to these
Rules.
e. A utility shall not make temporary or intermittent assignments, or
rotations to its energy marketing affiliates. Utility employees not
involved in marketing may be used on a temporary basis (less than
30% of an employee’s chargeable time in any calendar year) by
affiliates not engaged in energy marketing only if:
i. All such use is documented, priced and reported in
accordance with these Rules and existing Commission
reporting requirements, except that when the affiliate
obtains the services of a non-executive employee,
compensation to the utility should be priced at a minimum
of the greater of fully loaded cost plus 10% of direct labor
cost, or fair market value. When the affiliate obtains the
services of an executive employee, compensation to the
utility should be priced at a minimum of the greater of fully
loaded cost plus 15% of direct labor cost, or fair market
value.
ii. Utility needs for utility employees always take priority over
any affiliate requests;
59
iii. No more than 5% of full time equivalent utility employees
may be on loan at a given time;
iv. Utility employees agree, in writing, that they will abide by
these Affiliate Transaction Rules; and
v. Affiliate use of utility employees must be conducted
pursuant to a written agreement approved by appropriate
utility and affiliate officers.
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APPENDIX A-3
H. Transfer of Goods and Services: To the extent that these Rules do not
prohibit transfers of goods and services between a utility and its affiliates,
and except for as provided by Rule V.G.2.e, all such transfers shall be subject
to the following pricing provisions:
1. Transfers from the utility to its affiliates of goods and services produced,
purchased or developed for sale on the open market by the utility will be
priced at fair market value.
2. Transfers from an affiliate to the utility of goods and services produced,
purchased or developed for sale on the open market by the affiliate shall
be priced at no more than fair market value.
3. For goods or services for which the price is regulated by a state or federal
agency, that price shall be deemed to be the fair market value, except that
in cases where more than one state commission regulates the price of
goods or services, this Commission’s pricing provisions govern.
4. Goods and services produced, purchased or developed for sale on the
open market by the utility will be provided to its affiliates and unaffiliated
companies on a nondiscriminatory basis, except as otherwise required or
permitted by these Rules or applicable law.
5. Transfers from the utility to its affiliates of goods and services not
produced, purchased or developed for sale by the utility will be priced at
fully loaded cost plus 5% of direct labor cost.
6. Transfers from an affiliate to the utility of goods and services not
produced, purchased or developed for sale by the affiliate will be priced at
the lower of fully loaded cost or fair market value.
VI. Regulatory Oversight A. Compliance Plans: No later than June 30, 2007, each utility shall file a
compliance plan by advice letter with the Energy Division of the
Commission. The compliance plan shall include:
1. A list of all affiliates of the utility, as defined in Rule I A of these Rules,
and for each affiliate, its purpose or activities, and whether the utility
claims that Rule II B makes these Rules applicable to the affiliate;
17
APPENDIX A-3
2. A demonstration of the procedures in place to assure compliance with
these Rules.
The utility’s compliance plan shall be in effect between the filing and a
Commission determination of the advice letter. A utility shall file a
compliance plan annually thereafter by advice letter where there is some
60
change in the compliance plan (i.e., when there has been a change in the
purpose or activities of an affiliate, a new affiliate has been created, or the
utility has changed the compliance plan for any other reason).
B. New Affiliate Compliance Plans: Upon the creation of a new affiliate the
utility shall immediately notify the Commission of the creation of the new
affiliate, as well as posting notice on its electronic bulletin board. No later
than 60 days after the creation of this affiliate, the utility shall file an advice
letter with the Energy Division of the Commission. The advice letter shall
state the affiliate’s purpose or activities, whether the utility claims that Rule II
B makes these Rules applicable to the affiliate, and shall include a
demonstration to the Commission that there are adequate procedures in place
that will ensure compliance with these Rules.
C. Affiliate Audit: The Commission’s Energy Division shall have audits
performed biennially by independent auditors. The audits shall cover the last
two calendar years which end on December 31, and shall verify that the
utility is in compliance with the Rules set forth herein. The Energy Division
shall post the audit reports on the Commission’s web site. The audits shall
be at shareholder expense.
D. Witness Availability: Affiliate officers and employees shall be made
available to testify before the Commission as necessary or required, without
subpoena, consistent with the provisions of Public Utilities Code Sections 314
and 701, the conditions in the Commission's orders authorizing the utilities'
holding companies and/or mergers and these Rules.
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APPENDIX A-3
E. Officer Certification. No later than March 31 of each year, the key officers of
a utility and its parent holding company, as defined in Rule V E (corporate
support), shall certify to the Energy Division of the Commission in writing
under penalty of perjury that each has personally complied with these Rules
during the prior calendar year. The certification shall state: I, [name], hold the office of [title] at [name of utility or holding company], and occupied this position from January 1, [year] to December 31[year], I hereby certify that I have reviewed the Affiliate Transaction Rules Applicable to Large California Energy Utilities of the California Public Utilities Commission and I am familiar with the provisions therein. I further certify that for the above period, I followed these Rules and am not aware of any violations of them, other than the following: [list or state “none”]. I swear/affirm these representations under penalty of perjury of the laws of the State of California. _________________________[Signature] Executed at________________[City], County of _______________, on ______________[Date ]
VII. Utility Products and Services A. General Rule: Except as provided for in these Rules, new products and
services shall be offered through affiliates.
B. Definitions: The following definitions apply for the purposes of Rule VII:
1. “Category” refers to a factually similar group of products and services
that use the same type of utility assets or capacity. For example, “leases of
land under utility transmission lines” or “use of a utility repair shop for
third party equipment repair” would each constitute a separate product or
service category.
2. “Existing” products and services are those which a utility is offering on
61
the effective date of these Rules.
3. “Products” include use of property, both real and intellectual, other than
those uses authorized under General Order 69-C.
4. “Tariff” or “tariffed” refers to rates, terms and conditions of services as
approved by this Commission or the Federal Energy Regulatory
Commission (FERC), whether by traditional tariff, approved contract or
other such approval process as the Commission or the FERC may deem
appropriate.
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APPENDIX A-3
C. Utility Products and Services: Except as provided in these Rules, a utility
shall not offer nontariffed products and services. In no event shall a utility
offer natural gas or electricity commodity service on a nontariffed basis. A
utility may only offer for sale the following products and services:
1. Existing products and services offered by the utility pursuant to tariff;
2. Unbundled versions of existing utility products and services, with the
unbundled versions being offered on a tariffed basis;
3. New products and services that are offered on a tariffed basis; and
4. Products and services which are offered on a nontariffed basis and which
meet the following conditions:
a. The nontariffed product or service utilizes a portion of a utility asset or
capacity;
b. such asset or capacity has been acquired for the purpose of and is
necessary and useful in providing tariffed utility services;
c. the involved portion of such asset or capacity may be used to offer the
product or service on a nontariffed basis without adversely affecting
the cost, quality or reliability of tariffed utility products and services;
d. the products and services can be marketed with minimal or no
incremental ratepayer capital, minimal or no new forms of liability or
business risk being incurred by utility ratepayers, and no undue
diversion of utility management attention; and
e. The utility’s offering of such nontariffed product or service does not
violate any law, regulation, or Commission policy regarding
anticompetitive practices.
D. Conditions Precedent to Offering New Products and Services: This Rule
does not represent an endorsement by the Commission of any particular
nontariffed utility product or service. A utility may offer new nontariffed
products and services only if the Commission has adopted and the utility has
established:
1. A mechanism or accounting standard for allocating costs to each new
product or service to prevent cross-subsidization between services a
utility would continue to provide on a tariffed basis and those it would
provide on a nontariffed basis;
2. A reasonable mechanism for treatment of benefits and revenues derived
from offering such products and services, except that in the event the
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APPENDIX A-3
62
Commission has already approved a performance-based ratemaking
mechanism for the utility and the utility seeks a different sharing
mechanism, the utility should petition to modify the performance-based
ratemaking decision if it wishes to alter the sharing mechanism, or clearly
justify why this procedure is inappropriate, rather than doing so by
application or other vehicle.
3. Periodic reporting requirements regarding pertinent information related
to nontariffed products and services; and
4. Periodic auditing of the costs allocated to and the revenues derived from
nontariffed products and services.
E. Requirement to File an Advice Letter: Prior to offering a new category of
nontariffed products or services as set forth in Rule VII C above, a utility shall
file an advice letter in compliance with the following provisions of this
paragraph.
1. The advice letter shall:
a. demonstrate compliance with these rules;
b. address the amount of utility assets dedicated to the non-utility
venture, in order to ensure that a given product or service does not
threaten the provision of utility service, and show that the new
product or service will not result in a degradation of cost, quality, or
reliability of tariffed goods and services;
c. address the potential impact of the new product or service on
competition in the relevant market including but not limited to the
degree in which the relevant market is already competitive in nature
and the degree to which the new category of products or services is
projected to affect that market.
d. be served on the service list of Rulemaking 97-04-011/Investigation 97-
04-012, as well as on any other party appropriately designated by the
rules governing the Commission’s advice letter process.
2. For categories of nontariffed products or services targeted and offered to
less than 1% of the number of customers in the utility’s customer base, in
the absence of a protest alleging non-compliance with these Rules or any
law, regulation, decision, or Commission policy, or allegations of harm,
the utility may commence offering the product or service 30 days after
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APPENDIX A-3
submission of the advice letter. For categories of nontariffed products or
services targeted and offered to 1% or more of the number of customers in
the utility’s customer base, the utility may commence offering the product
or service after the Commission approves the advice letter through the
normal advice letter process.
3. A protest of an advice letter filed in accordance with this paragraph shall
include:
a. An explanation of the specific Rules, or any law, regulation, decision,
or Commission policy the utility will allegedly violate by offering the
proposed product or service, with reasonable factual detail; or
b. An explanation of the specific harm the protestant will allegedly suffer.
63
4. If such a protest is filed, the utility may file a motion to dismiss the protest
within 5 working days if it believes the protestant has failed to provide the
minimum grounds for protest required above. The protestant has 5
working days to respond to the motion.
5. The intention of the Commission is to make its best reasonable efforts to
rule on such a motion to dismiss promptly. Absent a ruling granting a
motion to dismiss, the utility shall begin offering that category of products
and services only after Commission approval through the normal advice
letter process.
F. Existing Offerings: Unless and until further Commission order to the
contrary as a result of the advice letter filing or otherwise, a utility that is
offering tariffed or nontariffed products and services, as of the effective date
of this decision, may continue to offer such products and services, provided
that the utility complies with the cost allocation and reporting requirements
in this rule. No later than January 30, 1998, each utility shall submit an advice
letter describing the existing products and services (both tariffed and
nontariffed) currently being offered by the utility and the number of the
Commission decision or advice letter approving this offering, if any, and
requesting authorization or continuing authorization for the utility’s
continued provision of this product or service in compliance with the criteria
set forth in Rule VII. This requirement applies to both existing products and
services explicitly approved and not explicitly approved by the Commission.
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APPENDIX A-3
G. Section 851 Application: A utility must continue to comply fully with the
provisions of Public Utilities Code Section 851 when necessary or useful
utility property is sold, leased, assigned, mortgaged, disposed of, or
otherwise encumbered as part of a nontariffed product or service offering by
the utility. If an application pursuant to Section 851 is submitted, the utility
need not file a separate advice letter, but shall include in the application those
items which would otherwise appear in the advice letter as required in this
Rule.
H. Periodic Reporting of Nontariffed Products and Services: Any utility
offering nontariffed products and services shall file periodic reports with the
Commission’s Energy Division twice annually for the first two years
following the effective date of these Rules, then annually thereafter unless
otherwise directed by the Commission. The utility shall serve periodic reports
on the service list of this proceeding. The periodic reports shall contain the
following information:
1. A description of each existing or new category of nontariffed products
and services and the authority under which it is offered;
2. A description of the types and quantities of products and services
contained within each category (so that, for example, “leases for
agricultural nurseries at 15 sites” might be listed under the category
“leases of land under utility transmission lines,” although the utility
would not be required to provide the details regarding each individual
lease);
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3. The costs allocated to and revenues derived from each category;
4. Current information on the proportion of relevant utility assets used to
offer each category of product and service.
I. Offering of Nontariffed Products and Services to Affiliates: Nontariffed
products and services which are allowed by this Rule may be offered to
utility affiliates only in compliance with all other provisions of these Affiliate
Rules. Similarly, this Rule does not prohibit affiliate transactions which are
otherwise allowed by all other provisions of these Affiliate Rules.
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APPENDIX A-3
VIII. Complaint Procedures and Remedies
A. The Commission shall strictly enforce these rules. Each act or failure to act by
a utility in violation of these rules may be considered a separate occurrence.
B. Standing:
1. Any person or corporation as defined in Sections 204, 205 and 206 of the
California Public Utilities Code may complain to the Commission or to a
utility in writing, setting forth any act or thing done or omitted to be done
by any utility or affiliate in violation or claimed violation of any rule set
forth in this document.
2. “Whistleblower complaints” will be accepted and the confidentiality of
complainant will be maintained until conclusion of an investigation or
indefinitely, if so requested by the whistleblower. When a whistleblower
requests anonymity, the Commission will continue to pursue the
complaint only where it has elected to convert it into a Commissioninitiated
investigation. Regardless of the complainant’s status, the
defendant shall file a timely answer to the complaint.
C. Procedure:
1. All complaints shall be filed as formal complaints with the Commission
and complainants shall provide a copy to the utility’s designated officer
(as described below) on the same day that the complaint is filed.
2. Each utility shall designate an Affiliate Compliance Manager who is
responsible for compliance with these affiliate rules and the utility’s
compliance plan adopted pursuant to these rules. Such officer shall also
be responsible for receiving, investigating and attempting to resolve
complaints. The Affiliate Compliance Manager may, however, delegate
responsibilities to other officers and employees.
a. The utility shall investigate and attempt to resolve the complaint.
The resolution process shall include a meet-and-confer session with
the complainant. A Commission staff member may, upon request
by the utility or the complainant, participate in such meet-andconfer
sessions and shall participate in the case of a whistleblower
complaint.
A party filing a complaint may seek a temporary restraining order
at the time the formal complaint is filed. The defendant utility and
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APPENDIX A-3
other interested parties may file responses to a request for a
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temporary restraining order within 10 days of the filing of the
request. An assigned commissioner or administrative law judge
may shorten the period for responses, where appropriate. An
assigned commissioner or administrative law judge, or the
Commission shall act on the request for a temporary restraining
order within 30 days. The request may be granted when: (1) the
moving party is reasonably likely to prevail on the merits, and (2)
temporary restraining order relief is necessary to avoid irreparable
injury, will not substantially harm other parties, and is consistent
with the public interest.
A notice of temporary restraining order issued by an assigned
commissioner or administrative law judge will only stay in effect
until the end of the day of the next regularly-scheduled
Commission meeting at which the Commission can issue a
temporary restraining order or a preliminary injunction. If the
Commission declines to issue a temporary restraining order or a
preliminary injunction, the notice of temporary restraining order
will be immediately lifted. Whether or not a temporary restraining
order or a preliminary injunction is issued, the underlying
complaint may still move forward.
b. The utility shall prepare and preserve a report on each complaint,
all relevant dates, companies, customers, and employees involved,
and if applicable, the resolution reached, the date of the resolution
and any actions taken to prevent further violations from occurring.
The report shall be provided to the Commission and all parties
within four weeks of the date the complaint was filed. In addition,
to providing hard copies, the utility shall also provide electronic
copies to the Commission and to any party providing an e-mail
address.
c. Each utility shall file annually with the Commission a report
detailing the nature and status of all complaints.
d. The Commission may, notwithstanding any resolution reached by
the utility and the complainant, convert a complaint to an
investigation and determine whether the utility violated these
rules, and impose any appropriate penalties under Section VIII.D.
or any other remedies provided by the Commission’s rules or the
Public Utilities Code.
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APPENDIX A-3
3. The utility will inform the Commission’s Energy Division and Consumer
Services Division of the results of this dispute resolution process. If the
dispute is resolved, the utility shall inform the Commission staff of the
actions taken to resolve the complaint and the date the complaint was
resolved.
4. If the utility and the complainant cannot reach a resolution of the
complaint, the utility will so inform the Commission’s Energy Division. It
will also file an answer to the complaint within 30 days of the issuance by
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the Commission’s Docket Office of instructions to answer the original
complaint. Within 10 business days of notice of failure to resolve the
complaint, Energy Division staff will meet and confer with the utility and
the complainant and propose actions to resolve the complaint. Under the
circumstances where the complainant and the utility cannot resolve the
complaint, the Commission shall strive to resolve the complaint within
180 days of the date the instructions to answer are served on the utility.
5. The Commission shall maintain on its web page a public log of all new,
pending and resolved complaints. The Commission shall update the log
at least once every week. The log shall specify, at a minimum, the date the
complaint was received, the specific allegations contained in the
complaint, the date the complaint was resolved and the manner in which
it was resolved, and a description of any similar complaints, including the
resolution of such similar complaints.
6. Preliminary Discussions
a. Prior to filing a formal complaint, a potential complainant may
contact the responsible utility officer and/or the Energy Division to
inform them of the possible violation of the affiliate rules. If the
potential complainant seeks an informal meeting with the utility to
discuss the complaint, the utility shall make reasonable efforts to
arrange such a meeting. Upon mutual agreement, Energy Division
staff and interested parties may attend any such meeting.
b. If a potential complainant makes an informal contact with a utility
regarding an alleged violation of the affiliate transaction rules, the
utility officer in charge of affiliate compliance shall respond in
writing to the potential complainant within 15 business days. The
response would state whether or not the issues raised by the
potential complainant require further investigation. (The potential
complainant does not have to rely on the responses in deciding
whether to file a formal complaint.)
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APPENDIX A-3
D. Remedies
1. When enforcing these rules or any order of the Commission regarding
these rules, the Commission may do any or all of the following:
a. Order a utility to stop doing something that violates these rules;
b. Prospectively limit or restrict the amount, percentage, or value of
transactions entered into between the utility and its affiliate(s);
c. Assess fines or other penalties;
d. Prohibit the utility from allowing its affiliate(s) to utilize the name
and logo of the utility, either on a temporary or a permanent basis;
e. Apply any other remedy available to the Commission.
2. Any public utility which violates a provision of these rules is subject to a
fine of not less than five hundred dollars ($500), nor more than $20,000 for
each offense. The remainder of this subsection distills the principles that
the Commission has historically relied upon in assessing fines and restates
them in a manner that will form the analytical foundation for future
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decisions in which fines are assessed. Before discussing those principles,
reparations are distinguished.
a. Reparations
Reparations are not fines and conceptually should not be included
in setting the amount of a fine. Reparations are refunds of excessive
or discriminatory amounts collected by a public utility. PU Code §
734. The purpose is to return funds to the victim which were
unlawfully collected by the public utility. Accordingly, the statute
requires that all reparation amounts are paid to the victims.
Unclaimed reparations generally escheat to the state, Code of Civil
Procedure § 1519.5, unless equitable or other authority directs
otherwise, e.g., Public Utilities Code § 394.9.
b. Fines
The purpose of a fine is to go beyond restitution to the victim and
to effectively deter further violations by this perpetrator or others.
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APPENDIX A-3
For this reason, fines are paid to the State of California, rather than
to victims.
Effective deterrence creates an incentive for public utilities to avoid
violations. Deterrence is particularly important against violations
which could result in public harm, and particularly against those
where severe consequences could result. To capture these ideas,
the two general factors used by the Commission in setting fines are:
(1) severity of the offense and (2) conduct of the utility. These help
guide the Commission in setting fines which are proportionate to
the violation.
i. Severity of the Offense
The severity of the offense includes several considerations.
Economic harm reflects the amount of expense which was
imposed upon the victims, as well as any unlawful benefits
gained by the public utility. Generally, the greater of these
two amounts will be used in establishing the fine. In
comparison, violations which caused actual physical harm to
people or property are generally considered the most severe,
with violations that threatened such harm closely following.
The fact that the economic harm may be difficult to quantify
does not itself diminish the severity or the need for sanctions.
For example, the Commission has recognized that deprivation
of choice of service providers, while not necessarily imposing
quantifiable economic harm, diminishes the competitive
marketplace such that some form of sanction is warranted.
Many potential penalty cases before the Commission do not
involve any harm to consumers but are instead violations of
reporting or compliance requirements. In these cases, the
harm may not be to consumers but rather to the integrity of
the regulatory processes. For example, compliance with
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Commission directives is required of all California public
utilities:
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APPENDIX A-3
“Every public utility shall obey and comply with every order,
decision, direction, or rule made or prescribed by the Commission
in the matters specified in this part, or any other matter in any way
relating to or affecting its business as a public utility, and shall do
everything necessary or proper to secure compliance therewith by
all of its officers, agents, and employees.” Public Utilities Code §
702.
Such compliance is absolutely necessary to the proper
functioning of the regulatory process. For this reason,
disregarding a statutory or Commission directive, regardless
of the effects on the public, will be accorded a high level of
severity.
The number of the violations is a factor in determining the
severity. A series of temporally distinct violations can
suggest an on-going compliance deficiency which the public
utility should have addressed after the first instance.
Similarly, a widespread violation which affects a large
number of consumers is a more severe offense than one
which is limited in scope. For a “continuing offense,” PU
Code § 2108 counts each day as a separate offense.
ii. Conduct of the Utility
This factor recognizes the important role of the public
utility’s conduct in (1) preventing the violation, (2) detecting
the violation, and (3) disclosing and rectifying the violation.
The public utility is responsible for the acts of all its officers,
agents, and employees:
“In construing and enforcing the provisions of this part
relating to penalties, the act, omission, or failure of any
officer, agent, or employee of any public utility, acting
within the scope of his [or her] official duties or
employment, shall in every case be the act, omission, or
failure of such public utility.” Public Utilities Code
§ 2109.
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APPENDIX A-3
(1) The Utility’s Actions to Prevent a Violation. Prior to
a violation occurring, prudent practice requires that all public utilities
take reasonable steps to ensure compliance with Commission directives.
This includes becoming familiar with applicable laws and regulations, and
most critically, the utility regularly reviewing its own operations to ensure
full compliance. In evaluating the utility’s advance efforts to ensure
compliance, the Commission will consider the utility’s past record of
compliance with Commission directives.
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(2) The Utility’s Actions to Detect a Violation. The
Commission expects public utilities to monitor diligently their activities.
Where utilities have for whatever reason failed to meet this standard, the
Commission will continue to hold the utility responsible for its actions.
Deliberate as opposed to inadvertent wrong-doing will be considered an
aggravating factor. The Commission will also look at the management’s
conduct during the period in which the violation occurred to ascertain
particularly the level and extent of involvement in or tolerance of the
offense by management personnel. The Commission will closely
scrutinize any attempts by management to attribute wrong-doing to rogue
employees. Managers will be considered, absent clear evidence to the
contrary, to have condoned day-to-day actions by employees and agents
under their supervision.
(3) The Utility’s Actions to Disclose and Rectify a
Violation. When a public utility is aware that a violation has occurred, the
Commission expects the public utility to promptly bring it to the attention
of the Commission. The precise timetable that constitutes “prompt” will
vary based on the nature of the violation. Violations which physically
endanger the public must be immediately corrected and thereafter
reported to the Commission staff. Reporting violations should be
remedied at the earliest administratively feasible time.
Prompt reporting of violations furthers the public interest by allowing for
expeditious correction. For this reason, steps taken by a public utility to
promptly and cooperatively report and correct violations may be
considered in assessing any penalty.
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APPENDIX A-3
iii. Financial Resources of the Utility
Effective deterrence also requires that the Commission
recognize the financial resources of the public utility in setting a
fine which balances the need for deterrence with the
constitutional limitations on excessive fines. Some California
utilities are among the largest corporations in the United States
and others are extremely modest, one-person operations. What
is accounting rounding error to one company is annual revenue
to another. The Commission intends to adjust fine levels to
achieve the objective of deterrence, without becoming excessive,
based on each utility’s financial resources.
iv. Totality of the Circumstances in Furtherance of the Public
Interest
Setting a fine at a level which effectively deters further unlawful
conduct by the subject utility and others requires that the
Commission specifically tailor the package of sanctions,
including any fine, to the unique facts of the case. The
Commission will review facts which tend to mitigate the degree
of wrongdoing as well as any facts which exacerbate the
wrongdoing. In all cases, the harm will be evaluated from the
70
perspective of the public interest.
v. The Role of Precedent
The Commission adjudicates a wide range of cases which
involve sanctions, many of which are cases of first impression.
As such, the outcomes of cases are not usually directly
comparable. In future decisions which impose sanctions the
parties and, in turn, the Commission will be expected to
explicitly address those previously issued decisions which
involve the most reasonably comparable factual circumstances
and explain any substantial differences in outcome.
IX. Protecting the Utility’s Financial Health
A. Information from Utility on Necessary Capital. Each utility shall
provide to the Commission on the last business day of November of
each year a report with the following information:
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APPENDIX A-3
1. the utility’s estimate of investment capital needed to build or
acquire long-term assets (i.e., greater than one year), such as
operating assets and utility infrastructure, over each of the next five
years;
2. the utility’s estimate of capital needed to meet resource
procurement goals over each of the next five years;
3. the utility’s policies concerning dividends, stock repurchase and
retention of capital for each year;
4. the names of individuals involved in deciding corporate policies for
the utility’s dividends, stock repurchase and retention of capital;
5. the process by which corporate policies concerning dividends,
stock repurchase and retention of capital are implemented; and
6. how the utility expects or intends to meet its investment capital
needs.
B. Restrictions on Deviations from Authorized Capital Structure. A
utility shall maintain a balanced capital structure consistent with that
determined to be reasonable by the Commission in its most recent
decision on the utility’s capital structure. The utility’s equity shall be
retained such that the Commission’s adopted capital structure shall be
maintained on average over the period the capital structure is in effect
for ratemaking purposes. Provided, however, that a utility shall file an
application for a waiver, on a case by case basis and in a timely
manner, of this Rule if an adverse financial event at the utility reduces
the utility’s equity ratio by 1% or more. In order to assure that
regulatory staff has adequate time to review and assess the application
and to permit the consideration of all relevant facts, the utility shall not
be considered in violation of this Rule during the period the waiver is
pending resolution. Nothing in this provision creates a presumption
of either reasonableness or unreasonableness of the utility’s actions
which may have caused the adverse financial event.
C. Ring-Fencing. Within three months of the effective date of the
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decision adopting this amendment to the Rules, a utility shall obtain a
non-consolidation opinion that demonstrates that the ring fencing
around the utility is sufficient to prevent the utility from being pulled
into bankruptcy of its parent holding company. The utility shall
promptly provide the opinion to the Commission. If the current ringfencing
provisions are insufficient to obtain a non-consolidation
opinion, the utility shall promptly undertake the following actions:
1. notify the Commission of the inability to obtain a non-consolidation
opinion;
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APPENDIX A-3
2. propose and implement, upon Commission approval, such ringfencing
provisions that are sufficient to prevent the utility from being
pulled into the bankruptcy of its parent holding company; and then
3. obtain a non-consolidation opinion.
D. Changes to Ring-Fencing Provisions. A utility shall notify the
Commission of any changes made to its ring-fencing provisions within
30 days.
(END OF APPENDIX A-3)
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