Clean Energy Fuels Corp. v. Cal. Pub. Utilities Comm'n

227 Cal.App.4th 641

174 Cal.Rptr.3d 297

CLEAN ENERGY FUELS CORP., Petitioner,

v. CALIFORNIA PUBLIC UTILITIES COMMISSION, Respondent,Southern California Gas Company, Real Party in Interest.

G048820

Court of Appeal, Fourth District, Division 3, California.

Filed May 29, 2014

As Modified June 27, 2014

See 8 Witkin, Summary of Cal. Law (10th ed. 2005) Constitutional Law, § 1084 et seq.

Original proceedings; review of decisions of the Public Utilities Commission of the State of California. Decisions affirmed. (CPUC Nos. D.12–12–037 & D.13–10–042)

Goodin, MacBride, Squeri, Day & Lamprey, Thomas J. MacBride, Anne H. Hartman; Alcantar & Kahl, Evelyn Kahl, San Francisco, and Katherine Rosenberg for Petitioner.

Frank R. Lindh, San Francisco, Helen W. Yee and Monica McCrary for Respondent.

Steven D. Patrick, Jason Egan; Jones Day, Charles C. Read and Haley McIntosh, Los Angeles, for Real Party in Interest.

OPINION

ARONSON, J.

Clean Energy Fuels Corp. (Clean Energy) files petitions for writ of review to challenge the California Public Utilities Commission's (PUC) decisions approving Southern California Gas Company's (SoCalGas) application for a “Compression Services Tariff.” Under the tariff, SoCalGas would design, build, own, operate, and maintain equipment on nonresidential customers' property to compress, store, and dispense natural gas above standard line pressure for customer end-use applications, including natural gas vehicle refueling, combined heat and power facilities, and peaking power plants.

Clean Energy contends we must annul the PUC's decisions because the competitive advantages SoCalGas has as a regulated monopoly utility allows it to unfairly compete with nonutility enterprises in the unregulated compressed natural gas market. According to Clean Energy, the PUC's decisions approving the Compression Services Tariff are inconsistent with approximately 20 years of PUC precedent establishing policies and rules to promote the development of alternative fuel vehicle markets through fair competition. Clean Energy also contends the PUC failed to make adequate findings explaining its reasons for rejecting Clean Energy's proposal to have SoCalGas provide the proposed compression services through an unregulated affiliate that cannot exploit SoCalGas's competitive advantages. Finally, Clean Energy challenges the sufficiency of the evidence to support the PUC's findings the Compression Services Tariff will expand the use of compressed natural gas in the Los Angeles area and thereby reduce air pollution and greenhouse gas emissions.

We affirm the PUC's decisions approving the Compression Services Tariff. The PUC's decisions acknowledge SoCalGas's monopoly status could provide it with unfair competitive advantages over nonutility enterprises, and therefore the PUC imposed several reporting, cost tracking, and marketing restrictions on SoCalGas to prevent it from unfairly competing. With those restrictions in place, the PUC determined the Compression Services Tariff does not provide SoCalGas unfair competitive advantages and PUC precedent supports adoption of the tariff. We conclude the evidence in the record and the PUC's findings support those determinations and the PUC's rejection of Clean Energy's unregulated affiliate proposal. We also conclude substantial evidence supports the PUC's findings the Compression Services Tariff will increase natural gas use and thereby reduce air pollution and greenhouse gas emissions.

IFacts and Procedural History

SoCalGas is a public utility and regulated monopoly provider of natural gas for all of Southern California except San Diego. The PUC regulates SoCalGas by establishing the official rates and terms of its service through various tariffs and rules.¹ SoCalGas delivers natural gas to its customers at standard pressures that range from one-third of a pound per square inch to several hundred pounds per square inch depending on where the customer connects to SoCalGas's distribution system. SoCalGas does not guarantee nonstandard pressure levels under its standard tariff terms.

SoCalGas's Tariff Rule No. 2, however, states nonstandard “delivery pressures can be provided upon request and acceptance by [SoCalGas],” including any “pressure as [SoCalGas] and the Customer agree to.” Tariff Rule No. 2 authorizes SoCalGas to enter into special commercial agreements with customers to plan, build, own, operate, and maintain special facilities to deliver gas under pressure conditions that depart from standard system pressure conditions at the customer's location. The PUC's General Order No. 58–A, entitled Standards for Gas Service in the State of California, further authorizes SoCalGas and all other regulated gas providers to supply gas at nonstandard pressure upon a customer's request.

In November 2011, SoCalGas applied for PUC approval to expand its compression services and establish more uniform service terms. SoCalGas's application explained it sought to provide “a new tariff service ... to meet the current and future needs of non-residential customers requiring natural gas compression above standard line pressure for customer end-use applications. Examples of customer end-use applications that can be served under the proposed tariff include Natural Gas Vehicle ... refueling operations, Combined Heat and Power ... facilities, and peaking power plants.”

Under the Compression Services Tariff, “SoCalGas will design, procure, construct, own, operate, and maintain on customer premises, equipment associated with the compression of natural gas in order to meet customer-specified pressure requirements.” “SoCalGas will not, however, conduct activities beyond the point of the customer's receipt of compression service and, as a consequence, will neither own, operate, or maintain facilities nor conduct business operations beyond the point of service delivery.” “SoCalGas will price the tariff via a [standardized] service contract that includes cost and rate components, adjustments, performance requirements and payment terms agreed upon in advance by the customer and SoCalGas.”

Clean Energy “is the largest provider of natural gas fuel for transportation in North America and a global leader in the expanding natural gas vehicle market.” It competes with more than 35 other companies in Southern California to design, build, own, operate, and maintain natural gas vehicle refueling stations. At the time of the tariff application, Clean Energy had built 62 natural gas vehicle refueling stations in SoCalGas's service area (23 percent of the stations), and combined with one other competitor (Integrys Transportation Fuels, LLC) to service 82 percent by volume of all compressed natural gas in SoCalGas's service area. SoCalGas supplies the natural gas for Clean Energy's customers; Clean Energy simply compresses that gas to the pressure required by its customers' natural gas vehicles. To bid and construct a refueling station, Clean Energy requires information from SoCalGas concerning its supply line to Clean Energy's customers and also requires SoCalGas's cooperation to connect Clean Energy's facilities to SoCalGas's distribution system.

Clean Energy filed a protest with the PUC to challenge SoCalGas's Compression Services Tariff. The opposition argued SoCalGas's status as the monopoly gas supplier for customers within its service area enables SoCalGas to unfairly compete with Clean Energy and all other compression service providers, and therefore approval of the Compression Services Tariff would be inconsistent with approximately two decades of PUC decisions establishing policies and rules to promote the development of alternative fuel vehicle markets through fair competition. (See Opinion on Low Emission Vehicle Policy Guidelines (July 21, 1993) 145 P.U.R.4th 243, 1993 WL 773480, 1993 Cal. PUC Lexis 574 (Phase I LEV Guidelines ); Opinion on Low Emission Vehicle Policy Guidelines Phase II (Nov. 21, 1995) 165 P.U.R.4th 503, 1995 WL 768974, 1995 Cal. PUC Lexis 978 (Phase II LEV Guidelines ); Opinion Adopting Standards of Conduct Governing Relationships Between Utilities and Their Affiliates (Dec. 16, 1997) 183 P.U.R.4th 503, 1997 WL 812239, 1997 Cal. PUC Lexis 1139 (Affiliate Transaction Rules ); Phase 2 Decision Establishing Policies to Overcome Barriers to Electric Vehicle Deployment and Complying with Public Utilities Code Section 740.2 (July 14, 2011) 292 P.U.R.4th 169, 2011 WL 3211060, 2011 Cal. PUC Lexis 394 (Electric Vehicle Policies ).) According to Clean Energy, the PUC's decision in Affiliate Transaction Rules required an unregulated affiliate of SoCalGas to provide the proposed services under the Compression Services Tariff because it would not share any of the ratepayer resources available to SoCalGas as a monopoly utility (Affiliate Option).

In June 2012, an administrative law judge conducted a two-day evidentiary hearing on SoCalGas's application. The judge issued a proposed decision approving the application in November 2012, and the PUC approved that decision in December 2012 after considering objections from Clean Energy and others. PUC Decision No. 12–12–037 approved SoCalGas's Compression Services Tariff subject to several reporting, cost tracking, and marketing restrictions designed to protect ratepayers and prevent SoCalGas from unfairly competing in the compressed gas services market. With the restrictions it imposed, the PUC found the new tariff “is in the public interest because it offers additional choice to consumers and makes more widely available a service that reduces the health and environmental impacts from air pollution, reduces greenhouse gas emissions, and will lead to an increase in the use of natural gas, an alternative to gasoline and diesel fuel.”

The restrictions the PUC imposed on SoCalGas's Compression Services Tariff include (1) prohibiting SoCalGas from using bill inserts to promote the Compression Services Tariff; (2) requiring SoCalGas to use competitively...