Independent Energy Producers Association/Utility Reform Network (“IEP/TURN”)

223 Cal. App. 4th 945 2014 Cal. App. LEXIS 119 (February 5, 2014)

The Court of Appeal (First District, Division 5) reversed a Commission decision authorizing PG&E to acquire a new gas fired power plant in Oakley, California (the “Oakley Project”).  The Court held that uncorroborated hearsay could not constitute “substantial evidence in light of the whole record” (Section 1757(a)(4)) to support a finding of  a specific need for the project.  Almost two years earlier, in an unpublished opinion, (TURN v. PUC, 2012 Cal. App. Unpubl. LEXIS 2049) the same court reversed an earlier Commission decision approving the project, citing myriad procedural errors and concluding that “(t)he Commission’s procedural maneuvering runs afoul of Edison.”  (See Para. 19 infra.)  PG&E filed another application in 2012 and the Scoping Memo (Section 1701.1(b)) provided that one of the issues in that proceeding was whether there was a specific need for the Oakley Project.  In support of its showing on that issue, PG&E introduced a declaration of an official of the California Independent System Operator (“CAISO”) which included certain statements (not specifically directed to any need for Oakley) regarding the need for increased system-wide capacity in California by the end of 2017.  The CAISO official, however, was not proffered as a witness at the evidentiary hearings in the matter.  Accordingly, the Administrative Law Judge (“ALJ”) ruled that the declaration of the CAISO official could not be introduced for the truth of the matter asserted in the declaration because the statement was hearsay.  She admitted the declaration for the purpose of establishing that CAISO had reached a final determination on the issue of significant negative reliability risk, but not for the purpose of showing that there was a specific need for the Oakley Project.  Her proposed decision denied the application but the Commission adopted an alternate decision approving the application, relying on the declaration of the CAISO official.  The Independent Energy Producers Association (“IEP”) and The Utility Reform Network (“TURN”) sought review of the decision, arguing that their substantial rights had been violated because of the Commission’s reliance on the CAISO declaration and noted that the admission of hearsay denied them the opportunity to cross-examine the declarant on the substance of his opinion- a denial exacerbated by the fact that the admission of his opinion itself occurred well after briefs had been filed.  While the Court reversed the Commission because of its reliance on hearsay evidence, it did not do so in response to Petitioners’ argument that their substantial rights had been violated.  Instead, the Court held that the Commission’s determination on a principal issue – the specific need for the project- was not supported by substantial evidence (Section 1757(a)(4)), a secondary argument raised by Petitioners.  The Court did not dispute the Commission’s authority to receive hearsay evidence; it concluded, however, that the Commission’s “finding that the Oakley Project is needed cannot rest on those materials alone.”  The Court held that because there was no other evidence to support the finding of the need, the Court was required to reverse the decision pursuant to Section 1757(a)(4).  The reversal raises questions with regard to the Commission’s discretion under Section 1701.1(a) to determine whether a hearing is required in a particular matter.  Is the Commission lawfully required to conduct a hearing where a protest to an application contests a factual assertion in the application?  When issued, outcome raised the question of whether the Commission could finesse any such requirement by deeming the factual issue non-material and, since no hearing is held, never issuing a Scoping Memo; today, however, a scoping memo is required in all matters.  (Note that in this case as well as Huntington Beach (Para. 14) and Edison (Para. 19), the content of the Scoping Memo set the stage for the reversal.)  Moreover, even if a hearing is set and a Scoping Memo issued, with what level of discretion is the Assigned Commissioner vested in terms of its content? The Commission asked the California Supreme Court to depublish this opinion but the Court did not do so.


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