On June 9, 2011, the California Public Utilities Commission held its regularly-scheduled agenda meeting. The meeting was dominated by two matters: the Commission’s upcoming investigation into the proposed AT&T/T-Mobile merger, and the Independent Review Panel’s report on the PG&E San Bruno pipeline rupture.
After listening to several public comments in support for the AT&T/T-Mobile merger, the Commissioners engaged in a debate about how an Order Instituting Investigation should proceed, and what the scope of the inquiry ought to be relative to the proposed merger. By a 3-2 vote, with President Peevey and Commissioner Simon dissenting, the Commission chose the option that would permit it to closely examine any California-specific effects of the merger and consider whether the CPUC should take any further action or impose conditions based on those impacts.
The Independent Review Panel presented its findings on the San Bruno matter in a lengthy presentation to the Commission, concluding that the pipeline rupture was a result of multiple weaknesses in PG&E’s management and oversight of its pipeline system and the CPUC’s lack of resources to monitor PG&E’s oversight and lack of an organizational system that would have elevated concerns about PG&E’s performance.
The Commission deferred consideration of the anticipated telecommunications competition OIR, holding that item until the June 23rd meeting. These and other items of interest on the Commission’s public agenda are discussed in further detail below.
REGULAR AND CONSENT AGENDA ITEMS
- Commission Authorizes Investigation Into Proposed AT&T Inc./T-Mobile USA Merger and Its Effect on California Ratepayers and the California Economy
(Item 31A, adopted 3-2 on regular agenda) – This Order Instituting Investigation (OII) will investigate issues and examine data relevant to the proposed acquisition by AT&T Inc. and T-Mobile USA, Inc. The OII will address whether the merger meets the requirements of applicable law and consider whether additional Commission action is warranted based on the proposed merger.
Two proposals were considered, referred to as “Option A” and “Option B.” Option A, the choice adopted by the Commission, will look closely at the merger in the context of California-specific issues. Option A was supported by Commissioners Sandoval, Florio and Ferron. Option B would have focused on the narrower goal of providing comments to the Federal Communications Commission (FCC) in as timely a manner as possible, recognizing that the merger is really more of a national issue that does not merit an in-depth inquiry by this Commission. President Peevey and Commissioner Simon supported Option B. The draft of Option A considered at the meeting is available here.
- Verizon California Inc. Granted Authority to Discontinue Automatic Delivery of Residential White Pages Telephone Directories
(Item 32, adopted 3-2 on consent agenda) – This Resolution approves Verizon California’s request to end automatic delivery of white page directories containing residential listings. Instead, customers will be offered the option of receiving printed white pages directory or electronic white page listings on a CD-ROM, in addition to access to online white pages listings. Verizon will continue to distribute white page business listings, government listings, yellow pages, and consumer guides automatically. Citing “material, positive effects” on the environment, Verizon estimates that the change will eliminate use of approximately 1,870 tons of paper per year, and result in a reduction of 7,293 tons of carbon dioxide. In dissent, Commissioners Sandoval and Florio expressed concern that further information was necessary to determine whether this was the most effective and consumer-friendly means of accomplishing Verizon’s overall goals, and suggested that the Basic Service Proceeding was the proper place to address these issues. The Draft Resolution associated with this item is available here.
- $168,171 in CASF Funding Granted to Frontier Communications of the Southwest for its San Bernardino Unserved Broadband Project
(Item 8, adopted on consent agenda) – This Resolution adopts $148,171 in funding from the California Advanced Services Fund (CASF) for Frontier Communications of the Southwest, Inc.’s (Frontier Southwest) project to bring broadband to unserved areas in east San Bernardino County. The proposed Project is intended to extend high-speed internet service to new portions of Frontier’s rural exchanges near Lake Havasu and Parker Dam. The amount granted is 40% of the total project cost is $421,903. The Draft Resolution associated with this item is available here.
- Cal-Ore Granted Authority to Borrow $446,600 and Enter Into Loan Agreement With Rural Utilities Service
(Item 16, adopted on consent agenda) – This Decision grants Cal-Ore Telephone Company the authority to enter into a loan agreement with the Rural Utilities Service for the purpose of borrowing $446,600 under the American Recovery and Reinvestment Act’s (ARRA) Broadband Initiative Program (BIP), to fund a broadband infrastructure project to serve end users in north central Siskiyou County, and to encumber related utility assets. Cal-Ore is the incumbent local exchange carrier furnishing telecommunications services in its Dorris, Macdoel, Tulelake, and Newell exchanges located in portions of Modoc and Siskiyou Counties. Cal-Ore and its affiliated ISP, COC, were granted BIP funding, composed of a mix of grants and loans from the RUS. The project will benefit Cal-Ore’s customers by providing additional access to transport, backhaul, and broadband bandwidth. In addition, the project will provide expanded broadband access to customers in a predominantly unserved area of Siskiyou County near Cal-Ore’s ILEC territory. Cal-Ore’s affiliate will provide wireless broadband services and Voice over Internet Protocol (VoIP) services customers through the “last mile” wireless broadband facility to be constructed with the grant and loan funds. The Proposed Decision associated with this item is available here.
- Suspension of AT&T California’s Advice Letter No. 38241
(Item 33, adopted on consent agenda) – This Resolution lifts the suspension of AT&T California’s (AT&T) Advice Letter No. 38241, an Amendment for 2011 Modified UNE Rates. The Advice Letter was filed pursuant to a settlement agreement between AT&T and the California Association of Competitive Telecommunications Companies (CALTEL), whereby AT&T agreed to calculate the unbundled network element (UNE) recurring rate index and include the new UNE rate in annual advice letter filings. CALTEL disputed AT&T’s attempt to limit the UNE recurring rates to which the advice letter pertained, but the Commission finds here that the settlement agreement did have the more limited rate applicability, as AT&T had represented. The Draft Resolution underlying this item is available here.
- G-Five, LLC Permitted to Retain $3,900 From $104,000 in Illegal Dial-Around Compensation to Be Paid to Commission by Companies Fined for Connecting Automatic Dialing Devices to Payphones
(Item 6, adopted on consent agenda) – A settlement in Decision (D.) 11-01-017 addressed the improper connection of automatic dialing-announcing devices (i.e., robocalls) to customer-owned payphones, resulting in the illegal generation of “Dial Around Compensation” (DAC). The respondents in that case released all claims to $103,194 in the disputed DAC, and were barred from future operation of customer owned pay phones. This Proposed Decision modifies D. 11-01-017 to permit G-Five – the call aggregator for the respondents’ customer-owned payphones – to retain $3,900 in costs it incurred in assisting the Commission’s Consumer Protection and Safety Division (CPSD) with its analysis of respondents’ call records and administering a bank account set up to hold the DAC. The Proposed Decision associated with this item is available here.
- Certificate of Public Convenience and Necessity Granted to BRT Company, LLC Modified
(Item 9, adopted on consent agenda) – This Decision modifies a decision granting BRT Company, LLC a Certificate of Public Convenience and Necessity (CPCN) to provide limited facilities-based and resold competitive local exchange services within the California service areas of Pacific Bell Telephone Company d/b/a AT&T California (AT&T), Verizon, SureWest Telephone and Citizens Telecommunications Company of California, Inc., d/b/a Frontier Communication Company of California (Frontier). The Proposed Decision simply updates the CPCN to reflect a corporate name change to Big River Telephone Company, LLC to conform to National Exchange Carrier’s Association (NECA) requirements. The Proposed Decision associated with this item is available here.
SIGNIFICANT ENERGY ITEMS
- Independent Review Panel Presents Report on PG&E San Bruno Pipeline Explosion
The Independent Review Panel formed by the Commission to investigate the September 9, 2010 explosion in San Bruno of a Pacific Gas and Electric Company (PG&E) pipeline presented both a report and its findings during an hour-long presentation at the agenda meeting. The report concludes that the pipeline rupture was “a consequence of multiple weaknesses in PG&E’s management and oversight of the safety of its gas transmission system,” and that the CPUC “did not have the resources to monitor PG&E’s performance in pipeline integrity management adequately or the organizational focus that would have elevated concerns about PG&E’s performance in a meaningful way.”
The Panel noted at the outset that gas pipelines are meant to be stable systems, built with a margin of safety, but that because the materials involved in the system degrade, safety of the system depends on a lifecycle management process. The Panel concluded that there were chains broken in the steps that PG&E took to handle the crisis, but more fundamentally, there was no atmosphere of inquiry, thinking, or curiosity such that the pipeline lifecycle process would “fulsome”. The Panel noted that the quality assurance that is normally part of the continuous process of gas pipeline facility management was not present at PG&E. It further noted that the records necessary for quality assurance were absent. On the CPUC side, the Panel also cited several issues with the CPUC’s safety program, including a dire shortage in funding for the division assigned responsibility for overseeing gas pipeline safety, a need for more engineers with national-level integrity management training, an enforcement regime that allows the staff to issue fines, and the inordinate amount of staff resources devoted to mobile home parks and propane systems (43% of inspections done by the staff).
After inquiry by the Commissioners, Commissioner Peevey summarized the findings of the Panel: that the parties involved have drifted into a culture of complacency, and that it is not sufficient for the CPUC to simply rely on the consumer advocacy groups’ settlements with PG&E over such issues to be sufficient; that real oversight is needed. He noted that the Report was “damning of PG&E across the board” and both “deep and disturbing.” Commissioner Peevey committed the Commission to do everything they could to adopt all of the Panel’s recommendations as soon as possible, and strongly encouraged PG&E to do the same.
- CPUC Orders Testing or Replacement of All California Gas Pipeline Not Previously Pressure Tested
(Item 28, adopted 5-0 on regular agenda) – In a related matter, the Commission ordered all California gas transmission line operators to complete ongoing maximum allowable operating pressure calculations on gas pipelines and to prepare a plan to pressure test or replace all natural gas pipelines that were not pressure tested. After those “Implementation Plans” are developed, a series of technical workshops will be convened to assist pipeline operators in prioritizing segments of their Implementation Plans. Commissioner Florio noted that this was just the first of many decisions to come in this area, and that there is a “long hard journey ahead of us.” Commissioner Simon noted that it was crucial that the public be involved in this process, so as to restore public confidence in the system itself and in the CPUC. The Proposed Decision associated with this item is available here:.
SIGNIFICANT HELD OR WITHDRAWN TELECOMMUNICATION ITEMS
- OIR to Evaluate the Status of Telecommunications Competition in California and its Implications for Regulatory Policies
(Item 30, held to 6/23/11 by Staff) – This OIR would begin proceedings to examine the current state of telecommunications competition in California. The draft OIR relies on language from D.06-08-030, in which the Commission found that “there is a need to remain vigilant in monitoring the communications marketplace.” The Commission will also seek comment on the Communications Division’s Market Share Analysis of Retail Communication in California from 2001-2009, and on current market and technological developments affecting California communications markets. The end goal of the proposed rulemaking would be to determine the implications of these developments for California’s regulatory policies for communications markets, including making any necessary adjustments to the URF structure. The draft OIR associated with this item is available here.
- OIR to Revise the Certification Process for Telephone Corporations and the Registrations Process for Wireless Resellers
(Item 11, held to 6/23/11 by Staff) – This Order Instituting Rulemaking (OIR) would open a rulemaking to revise the requirements for telephone corporations seeking CPCNs under Public Utilities Code Section 1001, and commercial mobile radio telephone service providers (CMRS) seeking wireless reseller identification (WIR) registration under prior Commission decisions.
- Commission Policy Re: Deduction of FCC’s Program Support or Discount from Total California Teleconnect Fund Service Charges Incurred by Non-Profits and Rural Health Care Providers
(Item 34, held to 6/23/11 by Staff) – This Draft Resolution would adopt a policy that deducts the Federal Communications Commission’s (FCC) E-Rate program support or discount from the total California Teleconnect Fund (CTF) service charges incurred by qualifying rural health care providers and non-profit community based organizations, before computing the 50% CTF discount on the remaining amount. The policy would be intended to address a concern that the supported organizations may be receiving subsidies from both state and federal universal service/health care programs that may exceed their monthly recurring costs for CTF-eligible services. The Draft Resolution associated with this item is available here.
- Negative Declaration Approved for Central Valley Independent Network
(Item 18, held to 6/23/11 by Staff) – This Draft Resolution would approve a negative declaration pursuant to the California Environmental Quality Act for the Central Valley Independent Network ARRA/CASF broadband project. The Draft Resolution underlying this items is available at the following link.
MANAGEMENT AND COMMISSIONER REPORTS
- Commissioner Florio noted that former Administrative Law Judge Minkin is no longer his interim chief of staff. There will be further announcements about the staffing of his office at the next meeting.
- Commissioner Sandoval mentioned that three members of her interim staff (Chris Witteman, Lindsay Brown and Phil Weismehl) have concluded their terms and that there will be announcements regarding appointments to her staff at the next meeting.
- Commission Ferron mentioned that two of his interim advisors (Sarah Thomas and Mihael Colvin) will continue on his staff. Sarah Kamins of the Energy Division will join Commissioner Ferron’s staff.