0001 1 BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION 2 COMMISSION 3 WASHINGTON UTILITIES AND ) 4 TRANSPORTATION COMMISSION, ) ) 5 Complainant, ) ) 6 vs. ) DOCKET NO. PG-060215 ) Volume I 7 PUGET SOUND ENERGY, INC., ) Pages 1 - 13 ) 8 Respondent. ) --------------------------------- 9 10 A prehearing conference in the above matter 11 was held on June 27, 2007, at 1:35 p.m., at 1300 South 12 Evergreen Park Drive Southwest, Olympia, Washington, 13 before Administrative Law Judge ADAM TOREM. 14 15 The parties were present as follows: 16 WASHINGTON UTILITIES AND TRANSPORTATION 17 COMMISSION, by DONALD T. TROTTER, Assistant Attorney General, 1400 South Evergreen Park Drive Southwest, 18 Post Office Box 40128, Olympia, Washington 98504; telephone, (360) 664-1186 19 PUGET SOUND ENERGY, INC., by SHEREE STROM 20 CARSON, Attorney at Law, Perkins Coie, 10885 Northeast Fourth Street, Suite 700, Bellevue, Washington 98004; 21 telephone, (425) 635-1422. 22 23 24 Kathryn T. Wilson, CCR 25 Court Reporter 0002 1 P R O C E E D I N G S 2 JUDGE TOREM: Good afternoon. It is now about 3 1:36 in the afternoon on Wednesday, June 27th, 2007. 4 I'm Adam Torem, the newest administrative law judge 5 here at the WUTC, and this is Docket PG-060215. This 6 is a prehearing conference in that matter, and our 7 court reporter today is Kathy Wilson of Continental 8 Reporting Services. 9 The purpose of today's prehearing conference 10 is to take appearances of the parties, including anyone 11 who might be seeking to intervene in this matter. It's 12 the Washington Utilities and Transportation Commission 13 versus Puget Sound Energy, and it is a complaint filed 14 seeking a two million dollar penalty. 15 We will clarify the issues set out in the 16 Complaint and discuss a schedule for the hearing. 17 Today it sounds like we are just going to set up the 18 next status conference and discuss a few other 19 procedural matters, so let me ask for appearances. 20 First, I'll take Commission staff. 21 MR. TROTTER: My name is Donald T. Trotter. 22 I'm an assistant attorney general. My address is PO 23 Box 40128, Olympia, Washington, 98504-0128. My phone 24 number is (360) 664-1189. Fax number is (360) 25 586-5522, and my e-mail address is 0003 1 dtrotter@wutc.wa.gov. 2 JUDGE TOREM: From PSE? 3 MS. STROM CARSON: Yes, Your Honor, I'm 4 Sheree Strom Carson representing Puget Sound Energy. 5 My address is 10885 Northeast Fourth Street, Suite 700, 6 Bellevue, Washington, 98004. Phone is (425) 635-1422. 7 Fax is (425) 635-2422. My e-mail address is 8 scarson@perkinscoie.com. 9 JUDGE TOREM: Let me take the liberty of 10 attempting to summarize what I've seen in the pleadings 11 so far. This was a Complaint filed by Commission staff 12 against Puget Sound Energy on May 23rd, 2007, and it 13 set out three separate causes of action based on a 14 total of 127 separate incidents and alleging a total of 15 209 violations of federal regulation and additional 16 Commission regulations regarding pipeline 17 recordkeeping. 18 In sum, the causes of action allege that PSE 19 through its contractor, Pilchuck Contractors, 20 Incorporated, first failed to follow its own operations 21 and maintenance manual by either failing to have a 22 different person conduct certain follow-up inspections 23 or failing to conduct those inspections within 30 days 24 of the initial inspection or both, and that was alleged 25 to be in violation of 49 Code of Federal Regulations, 0004 1 CFR, Section 192.605(a). 2 The second cause of action said that PSE 3 through Pilchuck failed to maintain permanent gas leak 4 records with the details required by WAC 480-93-187, 5 and in this case, intentionally included some 6 inaccurate information in its record. The third cause 7 of action said that PSE, again through Pilchuck, failed 8 to maintain appropriate permanent records but instead 9 kept only computer-based summaries in violation of WAC 10 480-93-185. 11 Now, Commission staff contends that the 12 maximum penalty for these alleged violations comes up 13 to a whopping $5,225,000, and they are seeking instead 14 a lesser penalty but still a large number of two 15 million dollars. They are also seeking an order 16 requiring an independent audit of PSE's records that 17 are produced or maintained by Pilchuck and a 18 requirement that PSE submit a contract or follow the 19 insurance plan. 20 PSE filed an answer to this complaint on June 21 the 12th, 2007. They admitted that Pilchuck on 22 occasion may have failed to follow certain requirements 23 of the ONM manual as well as related follow-up 24 investigations of what they call "phantom leak 25 inspections" and recordkeeping regarding leak 0005 1 inspections. PSE also admitted that it could not 2 always provide certain copies of leak inspection 3 records at the time of the original Commission audit, 4 but they did note in their answer that they have since 5 located a number of those records. 6 PSE further acknowledged that some Pilchuck 7 employees may have intentionally recorded inaccurate 8 information and in some cases may have deleted or 9 altered information, but even so, PSE's contending that 10 some of the alleged violations have been barred from 11 enforcement by a statute of limitations, and PSE's 12 position, that I have noted, is that penalties sought 13 by the Commission staff is excessive and retributive in 14 nature, not corrective, particularly in light of PSE's 15 good-faith actions to achieve compliance after being 16 alerted to these potential discrepancies with the 17 Contractor's recordkeeping practices. 18 Mr. Trotter, from the Complaint that was 19 filed by your office and what I've said about the 20 Answer, does that generally match up? 21 MR. TROTTER: Generally so. Just a couple of 22 finer appointments, Your Honor. The first cause of 23 action does cite a federal regulation, but the 24 violation is of the state rule that requires them to 25 follow the federal regulation. 0006 1 And then on the maximum penalty, actually, 2 the amount you quoted was for the penalty based on 209 3 violations. The Complaint goes on in Paragraph 31 to 4 say the maximum would be substantially higher if the 5 impact of continuing violations is concluded. So with 6 those two nuances, I believe you gave an accurate 7 summary understanding both the Complaint and Answer 8 will speak for themselves. 9 JUDGE TOREM: Thank you. Ms. Carson? 10 MS. STROM CARSON: Yes, I think that was an 11 accurate summary of the Answer. 12 JUDGE TOREM: Mr. Trotter, I think in these 13 cases, and correct me if I'm wrong, that the Commission 14 staff as the filer of the Complaint will carry the 15 burden of proof, and the standard would be a 16 preponderance of the evidence in proving each of those; 17 is that correct? 18 MR. TROTTER: That's my understanding, Your 19 Honor. 20 JUDGE TOREM: Ms. Carson, is that your 21 understanding as well? 22 MS. STROM CARSON: That is my understanding. 23 JUDGE TOREM: If we get to hearing, it will 24 be a preponderance standard. I did want to note that 25 we have not received any formal petitions to intervene 0007 1 or any contact of any kind whatsoever. In our 2 prehearing prehearing discussion, we had some question 3 as to whether Pilchuck would like to intervene, and I 4 believe the parties have agreed I should give a 5 deadline of ten working days from the date of service 6 of this prehearing conference order, so somewhere on or 7 before the 10th, 11th of July will be the deadline, 8 maybe two weeks from today by the time everything is 9 served, and we will give Pilchuck and anybody that 10 might be a party of interest notice for their 11 opportunity to intervene or simply remain a party of 12 interest. Any questions about the intervention issue? 13 Mr. Trotter, you had indicated that today 14 there is a real good possibility of reaching 15 settlement. You've been working hard with Commission 16 staff and PSE down the road and that today we would not 17 be ready to set a complete hearing schedule but instead 18 simply invoke the discovery rule so that everybody is 19 working under Commission procedural rules and also set 20 up a status conference that based on my unavailability 21 in August and early September, we have agreed to set 22 for Thursday, September 20th. 23 So let me go back to Commission staff and ask 24 which discovery rule you would like to invoke, get 25 Ms. Carson's agreement to that and make a record on 0008 1 that, and then we will move on to the scheduling 2 matter. 3 MR. TROTTER: Your Honor, your understanding 4 is generally correct that we think right now the most 5 we can do is to schedule a status conference. We 6 discussed this briefly off the record, but just so it's 7 on the record, the Company has committed to filing a 8 more detailed answer responding more directly to the 9 specific factual allegations, particularly an 10 attachment that forms the Complaint, and that may take 11 them about a month to do. We think that's a reasonable 12 amount of time. 13 With respect to your statement that the 14 settlement is possible -- 15 JUDGE TOREM: Maybe I'm overly optimistic. 16 MR. TROTTER: We have certainly settled a lot 17 of cases and are amenable to working with the Company. 18 We are already talking about working on that issue, but 19 at this point, we really don't know what the prospects 20 are. 21 With respect to the discovery rule, 22 Commission rule WAC 480-07-400(2)(b) identifies four 23 types of adjudicative proceedings in which the methods 24 of discovery in Rule 410 and 415 will be available, and 25 whether or not this case qualifies, I think it does, 0009 1 but I would ask the parties stipulate that we invoke 2 the procedures -- I guess it's in 480-07-405, 410, and 3 415. Those cover data requests in general and 4 depositions and discovery conferences, and 420 and 425, 5 which covers protective orders and just discovery 6 disputes. So we would like the rubric available to us 7 that we can work under. In case an issue comes up, we 8 can deal with it under those rules. 9 JUDGE TOREM: Ms. Carson? 10 MS. STROM CARSON: Yes, that's fine. I JUST 11 wanted to clarify the timing for the data requests. Is 12 that in the WAC? 13 MR. TROTTER: It is. It's a ten day, and 14 that could be expanded if you notify us and explain 15 there is an issue, and we certainly understand there 16 are summertime issues. 17 MS. STROM CARSON: Then that's fine with the 18 Company. 19 JUDGE TOREM: Then we will make the record 20 now that WAC 480-07-400(2)(b) discovery is available, 21 and the subsequent sections of the administrative code 22 will apply, including the timing, and I trust the 23 cooperative nature between the exchange of documents 24 will travel on without any need for some supervision 25 from our office, at least from the ALD. 0010 1 Now, if it becomes sometime during the next 2 month that the parties are exchanging documents and it 3 becomes more ripe for settlement discussions, of course 4 the administrative law division can provide another ALJ 5 to help with dispute resolution. Those are explained 6 in the rules. I talked to Judge Rendahl, and she 7 suggested that she would make herself or Judge Moss or 8 Judge Clark available to handle this matter if that 9 becomes appropriate, so please keep that ready if it 10 becomes necessary or helpful to the parties. 11 Anything else on the discovery issues and the 12 potential for settlement to discuss today? Seeing 13 nothing else, then let's move on to the scheduling of 14 this potential status conference. 15 MS. STROM CARSON: One thing I might add, 16 Your Honor. The Company has talked with Commission 17 staff about a preliminary settlement conference, and we 18 are going to work out the timing of that amongst 19 ourselves, probably sometime in August, but for the 20 record, that is our plans to go ahead with some sort of 21 preliminary settlement conference in August. 22 JUDGE TOREM: Excellent. You had talked 23 about the third week in August as the first date 24 proposed, and before we went on the record, I explained 25 that I will be at NARUC so I can learn all about 0011 1 rate-making cases, and then I'll probably be in South 2 Korea for four or five weeks for the Air Force for my 3 reserve duty. So that would make me unavailable for 4 the date that you have proposed, and while I suggested 5 perhaps another judge could handle the scheduling 6 conference on my behalf, you also indicated that as 7 busy as August might be, then the week of September 8 17th would still be acceptable, and we looked at 9 Thursday, September 20th as a date for the status 10 conference. We haven't made any indication of morning 11 or afternoon or what's preferable. For Staff, that is 12 not an open meeting week. 13 MR. TROTTER: I think anytime that day will 14 suffice, Your Honor. 15 JUDGE TOREM: Coming from Bellevue, does it 16 make any difference? 17 MS. STROM CARSON: I don't think it matters 18 too much. I think any time in fine. 19 JUDGE TOREM: Let's say ten o'clock in the 20 morning, and I'm sure that that should be sufficient 21 for traffic concerns or anything else going on that 22 particular day. 23 We will probably be back in this room unless 24 we have a petition to intervene or there is some 25 greater interest and the case develops between now and 0012 1 then. Then we would probably move upstairs. 2 You had suggested, Mr. Trotter, that that 3 August date might be a good time to informally have the 4 parties meet for your own mini status conference or 5 perhaps the settlement conference. If there is 6 anything else that you want to make part of the record, 7 would you send that in the form of a letter indicating 8 what else has come up or any other issues to be raised 9 at this status conference. I don't think there will be 10 any objection from our division if it's an agreed 11 letter saying let's take up these other issues on the 12 record on September the 20th. 13 MR. TROTTER: That's fine, Your Honor. 14 JUDGE TOREM: Any other questions in the case 15 that we need to address today for procedural matters? 16 MR. TROTTER: One item we mentioned off the 17 record was the protective order. I think the parties 18 do not see a need for one today, but obviously, any 19 party can move for such an order if and when the need 20 arises. 21 JUDGE TOREM: We will just preserve that. If 22 it turns out, Ms. Carson, that any of the documents you 23 are providing require a protective order or some kind 24 of -- I don't want my absence to delay the exchange of 25 information -- then certainly, and Judge Rendahl is the 0013 1 chief judge here, let her know that there is something 2 we can take up out of order, and certainly if it comes 3 up before the 3rd of August, I'll be here to handle it 4 if something comes up before then. 5 MR. TROTTER: If an issue comes up that needs 6 ALJ attention after August 3rd, we should address that 7 to Judge Rendahl? 8 JUDGE TOREM: I would think so. She will 9 figure out if she's best equipped to handle that, or if 10 she's waiting to determine if it goes to hearing that 11 she needs to be the review judge or somebody else 12 handles it, then let her know the issue has come up, 13 and I will let her know what we've talked about today 14 and sort that out. Then for Commission staff, is there 15 anything else to address this afternoon? 16 MR. TROTTER: Not that I can think of, Your 17 Honor. 18 JUDGE TOREM: For PSE? 19 MS. STROM CARSON: I have nothing, Your 20 Honor. 21 JUDGE TOREM: That was more efficient than 22 possible. We are adjourned. 23 (Prehearing conference adjourned at 1:50 p.m.) 24 25