RICHMAN, J. —
Pursuant to its statutory authority to adopt "rules of practice and procedure" (Pub. Util. Code, § 1701, subd. (a)),
In the aftermath of a massive 2010 explosion of an underground gas pipeline owned and operated by Pacific Gas and Electric Company (PG&E), the PUC imposed a series of reforms to be instituted by PG&E. One of those reforms was that PG&E improve its recordkeeping and information technology capabilities. PG&E was directed to keep the PUC informed of any reported pipeline leaks and any discovered information regarding the safety of continuing pipeline operations. Thereafter, following discovery of a pipeline leak, PG&E also discovered that some information it had provided to the PUC concerning the internal pressure at which certain pipelines could be safely operated might not be correct. Approximately seven months after discovery of this mistake was internally verified by PG&E, it was communicated to the PUC via a written "Errata" to a previous filing. Following extensive hearings, the PUC deemed this filing both a substantive and a procedural violation of Rule 1.1, which the Commission determined had the effect of misleading the Commission. For this dual violation of Rule 1.1, the Commission imposed civil penalties totaling $14.35 million.
We granted PG&E's petition for a writ of review to consider (1) whether the penalties were validly imposed in the belief that Rule 1.1 does not invariably demand a scienter requirement; (2) whether the Commission correctly treated PG&E's act and omission as "continuing" violations; (3) whether the PUC's order to show cause provided sufficient notice of the grounds for which PG&E might be penalized; and (4) whether the penalties authorized by sections 2107 and 2108 are constitutionally excessive. With appropriate consideration for the unique powers of the PUC, we conclude that none of PG&E's contentions has merit. We therefore affirm the decisions of the PUC imposing the penalties and denying PG&E's request for rehearing.
The Legislature has also provided the PUC with extensive enforcement powers, including the imposition of monetary civil penalties: "Any public utility that violates or fails to comply with any provision of the Constitution of this state or of this part, or that fails or neglects to comply with any part or provision of any order, decision, decree, rule, direction, demand, or requirement of the commission, in a case in which a penalty has not otherwise been provided, is subject to a penalty of not less than five hundred dollars ($500), nor more than fifty thousand dollars ($50,000) for each offense." (§ 2107.) "In determining the amount of such penalty, ... the appropriateness of such penalty to the size of the business charged, the gravity of the violation, and the good faith of the person charged ... shall be considered." (§ 2104.5.) "Every violation ... is a separate and distinct offense, and in case of a continuing violation each day's continuance thereof shall be a separate and distinct offense." (§ 2108.)
This proceeding traces back to what is commonly known as the San Bruno pipeline explosion, the salient details of which were described in a PUC report as follows:
"On September 9, 2010, at approximately 6:11 pm, a 30-inch diameter natural gas transmission pipeline owned and operated by PG&E ruptured in San Bruno, California. Gas escaping from the rupture ignited resulting in the loss of eight lives, injuries to 58 people, destruction of 38 homes, moderate to severe damage to 17 homes and minor damage to 53 homes.
"The section of pipeline involved was Segment 180, ... located at the intersection of Earl Avenue and Glenview Drive .... [¶] ... [¶] Energy released from the rupture created a crater about 72 feet long by 26 feet wide. A 28-foot long section of pipe weighing approximately 3,000 pounds was ejected from the crater and landed approximately 100 feet from the crater in the middle of Glenview Drive." (Incident Investigation Report: September 9, 2010 PG&E Pipeline Rupture in San Bruno, California (Cal.P.U.C., Jan. 12, 2012) pp. 7-8 (Investigation Report).)
"During the 50 hours following the incident, about 600 firefighting (including emergency medical service) personnel and 325 law enforcement personnel responded. Fire crews and police officers conducted evacuations and door-to-door searches of houses throughout the response. In total, about 300
At the time of the explosion, the pipeline had been authorized to maintain a maximum allowable operating pressure (MAOP) of 400 psig,
Two weeks after the explosion, on September 23, 2010, the Commission ordered an investigation into the causes of "[t]he San Bruno explosion," which "may be the largest transmission pipeline explosion in an urban/suburban setting in U.S. history, certainly the most catastrophic in California history."
After conducting an extensive investigation into the pipeline explosion, the Commission's consumer protection and safety division concluded: "[T]he San Bruno incident was caused by a combination of multiple contributing factors: [¶] 1. PG&E's failure to follow accepted industry practices when it constructed Segment 180 in 1956; [¶] 2. PG&E's failure to comply with the integrity management requirements; [¶] 3. PG&E's inadequate record keeping practices; [¶] 4. Deficiencies in PG&E's SCADA system and inadequate procedures related to the work at the Milpitas Terminal[
"In 1956, when PG&E constructed the section of pipe that failed in San Bruno, it did not follow accepted good industry practice existing at the time. PG&E's failure to identify deficiencies in pipe manufacturing through inspection and testing at the time of construction resulted in the installation of defective pipe in the ground." (Investigation Rep., supra, at p. 15.) "PG&E was unable to produce records demonstrating that a strength test was performed on Segment 180 at the conclusion of its construction, and before the Segment was placed in operation." (Id. at p. 22.)
"The investigation found that PG&E did not comply with certain integrity management requirements in the federal pipeline safety regulations. Significant deficiencies were found in data gathering and integration, threat identification, risk assessment and assessment." (Investigation Rep., supra, at p. 25.)
In February 2011, the PUC, noting that the NTSB had already publicly expressed "concern about the safety implications of the PG&E record-keeping deficiencies the NTSB [had] uncovered in the San Bruno investigation," decided to commence an expansive investigation of PG&E's recordkeeping practices, not limited to the immediate time before the explosion — indeed, not limited to the San Bruno pipeline.
In September 2011, the PUC denied PG&E's "motion ... to delegate authority to the Executive Director to approve requests to lift operating pressure limitations," but "instead adopt[ed] an expedited hearing process for Commission consideration of such requests." (Cal.P.U.C. Proposed Dec. No. 11-09-006, supra, at p. 1.) The Commission reasoned that "the process proposed by PG&E is inadequate to discharge our Constitutional and statutory duties. The public interest in PG&E's natural gas operations is intense. Restoring MAOP in PG&E's transmission pipelines has significant implications for public safety. The public deserves to be informed about PG&E's proposed MAOP restoration and to have an opportunity to assess PG&E's evidence in support of the request. Moreover, PG&E's proposed delegation, particularly in light of the unspecified supporting analysis, goes well beyond the scope of ministerial matters for which the Commission may properly delegate its authority. The Commission ordered the operating pressure reductions... and the Commission should consider whether these ordered reductions should be lifted." (Id. at p. 7.) And, PG&E was cautioned, it "must be fully accountable for the pressure test and the assertion that the line can be safely operated at the restored MAOP." (Id. at p. 11.)
In December 2011, after PG&E had conducted the pressure test, the PUC authorized PG&E "to operate Lines 101, 132A, and 147 at a pressure no higher than 365 pounds per square inch gauge."
"PG&E's Vice President of Gas Transmission, Maintenance, and Construction, verified that PG&E has validated the engineering and construction of,
"... CPSD [(the Commission's consumer protection and safety division)] reviewed PG&E's supporting information and concluded that the information presented was adequate to support the conclusion that pressure on the lines could be safely increased to 365 psig." (Cal.P.U.C. Dec. No. 11-12-048, supra, 2011 Cal.P.U.C. Lexis 570 at p. *13.)
Again, PG&E was cautioned that it "must be fully accountable for ... the assertion that the line can be safe[l]y operated at the [restored MAOP]." (Cal.P.U.C. Dec. No. 11-12-048, supra, 2011 Cal.P.U.C. Lexis 570 at pp. *8-*9.)
Meanwhile, the previous month, November 2011, the PUC — noting that "PG&E appears to have failed to comply with federal regulations concerning the protection of persons and property in areas with higher concentrations of human occupancy and activity" — formally opened an investigation into the San Bruno explosion. (Order Instituting Investigation on the Commission's Own Motion (Nov. 10, 2011) Cal.P.U.C. Dec. No. I.11-11-009 [2011 Cal.P.U.C. Lexis 506, pp. *8-*9].) It began on January 12, 2012, when the PUC commenced a new, separate, and wide-ranging investigation: "This investigation will not be solely limited to the events that took place on September 9, 2010, but shall include all past operations, practices, and other events or courses of conduct that could have led to or contributed to the San Bruno explosion and fire. We will specifically consider what monetary fines and other remedies are appropriate to ensure that a catastrophe of this type does not occur again." (Cal.P.U.C. Dec. No. 1.12-01-007, supra, 2012 Cal.P.U.C. Lexis 39 at p. *4.)
"On October 18, 2012, a PG&E employee discovered that a portion of the pipe on Line 147 appeared to be of a different specification than that described in PG&E reports.[
"PG&E employees determined, based on the newly-discovered specification information, that the proper MAOP of Line 147 should be 330 psig rather than 365 psig. However, ... Line 147 was already operating at a reduced pressure of 330 psig or less, no further reduction in operating pressure was necessary....
"Over the next several months, PG&E investigated how some of the Line 147 pipe had been incorrectly identified in the records, reviewed all other specifications, re-reviewed the information obtained from construction activities on the entire Line 147, performed field examinations on the pipe, performed what is known as `destructive testing' on a portion of the pipe, and reviewed the records pertaining to the other pipelines affected by the Commission's [Decision] 11-02-048.
"Over the same period, PG&E employees found that certain federal pipeline regulations had been incorrectly applied to a portion of Line 101, another pipeline whose pressure had been restored by D.11-02-048. Whereas PG&E had previously relied on tests conducted in 1989 to determine the MAOP for that pipeline, employees concluded that under the regulations an earlier test conducted prior to 1974 should have been used for this purpose.
"PG&E employees determined, based on the change in regulatory classification, that the proper MAOP of that portion of Line 101 should be 330 psig rather than 365 psig. However, ... [as] Line 101 was already operating at a reduced pressure of 330 psig or less, no further reduction in operating pressure was necessary....
"On February 22, 2013, PG&E contacted the Commission's staff to arrange a meeting or teleconference to [report] these findings. A teleconference was held on March 20, 2013, during which PG&E employees discussed with the Commission's staff the corrected information relating to Lines 101 and 147. In response to requests by Commission staff during that teleconference, on May 2 and May 8, 2013, PG&E provided the staff with validation reports and other materials concerning Lines 101 and 147, and further advised that PG&E was continuing its review of records relating to these and other lines."
On July 3, 2013, PG&E submitted for filing a document entitled "Errata to Pacific Gas and Electric Company's Supporting Information for Lifting
PUC staff refused to accept this document for filing. On August 19, the PUC issued an order for PG&E to show cause (OSC) why it should not be sanctioned for violating Rule 1.1. The OSC recited that the Errata was "rejected ... as untimely to the extent that it sought to make a substantive change to issues" previously resolved by the Commission. And under the heading "Issues Revealed in PG&E's July Document," the OSC read as follows:
"PG&E's July document raises procedural and substantive issues. Procedurally, parties are not allowed to file pleadings for the purpose of correcting minor typographical or computational errors in previously filed applications. Parties are allowed to file pleadings for the purpose of making substantive changes to a previously filed application, and such filing triggers the opportunity for other parties to file a responsive pleading (unless limited or prohibited...). Here, PG&E appears to be revealing a substantial error in an application upon which the Commission has relied in issuing a decision. Attempting to correct an application eighteen months after the Commission issued a decision appears to be an unreasonable procedural choice and could be interpreted as attempting to create an inaccurate impression of a routine correction. The timing of the attempted filing, the day before a summer holiday weekend, also raise questions.
"Substantively, as the record shows in this proceeding and others, the accuracy of PG&E's natural gas transmission pipeline records has been and remains an extraordinarily controversial issue in which the public has an intense interest. The facts stated in PG&E's July filing appear to directly implicate this issue, particularly the continuing inaccuracy of PG&E's records and the happenstance means by which this most recent instance of erroneous records was discovered. Submitting this provocative information in a routine-appearing document could be seen as an attempt to mislead the Commission and the public on the significance of this new information."
The OSC was the subject of a hearing held on September 6, 2013, before three PUC commissioners (Ferron, Florio, and Sandoval) and two administrative law judges (ALJ), including the chief judge.
Counsel for TURN asked "Can you tell us why this pleading [(i.e., the Errata)] does not include the fact that this discovery was made eight to nine months prior to the date of the pleading?" Lead Counsel answered, "For purposes of this pleading, which was to provide notice to the Commission and the parties that there were errors and how they were corrected, that seems to me like way too much information." And responding to a question from a commissioner, Lead Counsel testified that PG&E was not "trying ... to sneak something below the radar."
Thereafter the Commission received written submissions. PG&E filed "comments," which for the first time raised the issue of whether a violation of Rule 1.1 required a mental state related to misleading the Commission, and arguing that PG&E had not "acted with any intent to mislead in connection with the submission of [the Errata]," nor with recklessness or gross negligence. PG&E further argued that "[n]o evidence supports a Rule 1.1 violation based on the July 3rd service date."
The City of San Bruno argued that the Errata "was submitted to the Commission as [a] mere artifice to mislead all parties in order to minimize PG&E's responsibility for past and ongoing deficiencies in its records." In its words: "PG&E obscured the significance of its Line 101 and 147 errors via the artifice of an `errata' filing precisely because the circumstances surrounding the faulty records for and operation of Lines 101 and 147 are identical to those that precipitated the disaster in San Bruno. After spending hundreds of millions of dollars ... PG&E's records are still dead wrong. Those inaccuracies, along with the fact that PG&E tried to camouflage its ongoing problems with an obscure regulatory filing rather than be forthcoming ought to scare this Commission, Commission staff, and every customer in PG&E territory because PG&E's behavior is still dangerous. [¶] ... [¶] Not only does bad data for Lines 147 and 101 demonstrate that the Commission cannot trust PG&E's records system, it also demonstrates that the Commission ... cannot trust PG&E to uphold its Rule 1.1 obligations to be forthcoming, truthful and complete with its regulators."
"PG&E's misleading information permitted PG&E to unsafely raise its MAOP throughout the system, in violation of the Commission's directives and standards. PG&E failed to timely and accurately inform the Commission of errors and incompleteness in its MAOP validation process violating Decision ... 11-12-048. The decision lifted MAOP restrictions based on PG&E's assurances that the MAOP validation process was subject to careful quality assurance procedures and had been completed.
"PG&E first learned of possible errors in its MAOP validation process on October 18, 2012 but failed to inform the Commission until July 3, 2013, more than eight months after PG&E ... learned of these errors. When PG&E finally disclosed this information to the Commission, the utility further misled the Commission by attempting to de-emphasize and in effect hide errors in the validation process through an `Errata' rather than a petition for modification of ... [Decision] 11-02-016 for information concerning possible errors in PG&E's MAOP validation process.
"SED contends that PG&E's conduct in this proceeding regarding critical maximum pressure on segments in its transmission system warrants penalties for violations of Rule 1.1 because:
"PG&E knew as early as October 18, 2012, that errors and records insufficiencies existed in its Pipeline Features List used to validate maximum segment pressures;
"Rather than advising the Commission as a regulatory body in writing of these errors, PG&E first chose to communicate with a Commission staffer, who acted in an advisory capacity only. SED advocacy staff did not learn of PG&E's contact with this individual until after the initiation of this Order to Show Cause;
"PG&E failed to provide this staffer with requested documents and information concerning the errors until the end of May 2013, and further misrepresented to the Commission in this OSC proceeding the contact's reaction to the information provided by PG&E (no staff personnel has ratified or approved PG&E's submissions);
"PG&E delayed notifying the Commission and parties of the potential errors in its MAOP validation process until July 3, 2013, some eight months after PG&E first recognized the potential error in its validation process;
"Using an Errata to notify the Commission of errors in the pipeline features list used in PG&E's critical MAOP Validation process — effectively disguising rather than clearly identifying the serious errors in its MAOP calculations." (Fn. omitted.)
SED also scoffed at PG&E's defense: "PG&E contends that using the term `errata' is nothing more than `[lead] counsel's good faith selection of a word that conveyed that the pleading was reporting errors ... such as "an error in printing or writing."' ... SED strongly disagrees. The errors in PG&E's PFL [(pipeline features list)], and the questions such errors pose for PG&E's MAOP validation process of the 2,088 segments that were reviewed, raise serious concerns regarding the safety of segments hydro tested blindly without sufficient knowledge...." "Hydro tests performed at too high a pressure can result in failure or worse, a pinhole leak or crack that may expand in time causing a rupture. PG&E's discovery of MAOP validation errors in its PFL should have been reported shortly after discovery.... [¶] ... PG&E failed to provide the Commission with notice of errors in its PFL in a reasonable period of time after discovery. As a result, the Commission was led to believe that hydro tests on PG&E's ... [gas] lines had been performed in a safe manner, using accurate ... data, when, in fact, the data was inaccurate leading to the possible over pressuring of lines during hydro tests."
A crucial point of SED's brief was that it treated each day of the eight months between October 18, 2012, and July 2, 2013 as part of a continuing violation. TURN made the same point in its brief: "PG&E should be required to pay the maximum $50,000 fine for each day of its Rule 1.1 violation. A continuing violation from October 24, 2012 to July 3, 2013, a total of 253 days, multiplied by the maximum $50,000 per violation yields a fine of $12,650,000."
The assigned ALJ's proposed decision concluded that PG&E "violated Rule 1.1 of the Commission's Rules of Practice and Procedure by not correcting promptly a material misstatement of fact in a pleading filed with the Commission and by mischaracterizing the correction when filed as a routine and non-substantive correction. PG&E is fined $6,750,000 for these violations." The fine, which treated both violations as continuing and deserving of the maximum $50,000 per day, was calculated as follows: "We begin the tabulation at the day PG&E first became obligated to inform the parties of the error in its representations to the Commissions, March 20, 2013 [(the date PG&E `informed Commission staff of its error and ... correction of the
Commissioner Ferron submitted an alternate proposed decision. He disagreed with the assigned ALJ only in the manner he believed PG&E should be sanctioned. Commissioner Ferron would run the $50,000 per day penalty for not revealing the discovered information from November 16, 2012 (the date on which "senior management of PG&E" became aware of the situation), to August 30, 2013 (the date on which PG&E filed the verified statement of its vice-president of gas transmission, maintenance and construction). This was a total of 287 days, making the penalty for this violation $14,350,000. He would add a penalty for "submitting a misleadingly titled and factually incomplete document, $50,000 per day for the 58 days it remained uncorrected at the Commission=$2,900,000."
The matter was then considered by the full Commission (Commissioners Ferron, Florio, Peevey, Peterman, and Sandoval), which heard arguments at a public hearing on December 2, 2013. PG&E's initial argument was given by Tony Earley, its chairman and CEO, to "underscore[] how seriously we take the issues at hand today." According to him, "looking back from a safety standpoint, I think that our staff did all the right things. I found no action that constituted an intentional effort to mislead the Commission." Earley was followed by Nick Stavropoulos, PG&E's executive vice-president of gas transmission, maintenance and construction, who, like Earley, had joined PG&E two years before, and who emphasized the "safety culture we are nurturing at PG&E." The Commission then heard from representatives of San Bruno and the SED, and final arguments by Earley and Stavropoulos.
On December 19, 2013, the Commission filed decision No. 13-12-053, concluding that PG&E "violated Rule 1.1 of the Commission's Rules of Practice and Procedure by not correcting promptly a material misstatement of fact in a pleading filed with the Commission and by mischaracterizing the correction submitted for filing on July 3, 2013 as a routine and non-substantive correction. PG&E is fined $14,350,000 for these violations."
Concerning what it called "Delay in Correcting Record," the Commission stated: "[T]he admissions by PG&E's Vice President [of gas transmission, maintenance and construction], coupled with the serious nature of the discrepancies, the widespread knowledge throughout the gas division of this
The Commission continued:
"The date when PG&E's top management became aware of the true nature of the pipeline is not determinative of whether PG&E should be accountable for its failure to inform the Commission promptly of the erroneous information underlying [Decision] 11-12-048. Given the importance of ensuring the integrity and safety of the transmission system, PG&E should have had internal procedures in place to ensure that incidents such as the discovery of record discrepancies for Line 147 would be relayed promptly to top management and reported to the Commission. [¶] ... [¶]
"When the Commission has issued a decision in a formal proceeding where a key Ordering Paragraph sets a safety standard that relies on material information later found to be erroneous, the proper method for a party to bring this to the Commission's attention would be through a prompt filing in the proceeding, which could be a motion to reopen the record or a petition for modification of the decision, depending on the circumstances. Since PG&E became aware of record discrepancies beginning on October 18, 2012, we find that PG&E should have prepared and submitted a filing to inform the Commission of this significant and material discovery no later than November 16, 2012. [¶] ... [¶] ... Once PG&E had knowledge of material errors in its filed Supporting Information that the Commission relied upon to set a safety standard in [Decision] 11-12-048, PG&E should have brought the record discrepancies to the Commission's attention through an appropriate filing while it investigated.... By omission, PG&E's failure to promptly make such a filing misled the Commission by allowing a `false statement of fact,' within the meaning of Rule 1.1, to remain uncorrected after PG&E had the knowledge to correct it. [¶] ... [¶]
"Instead of informing the Commission promptly, PG&E waited over seven months to correct information that it knew to be incorrect and that it knew the Commission had relied upon in issuing [Decision] 11-12-048. PG&E did not
"To summarize, we find that PG&E's obligation to inform the Commission of the errors in its 2011 Supporting Information that was relied on in Ordering Paragraph 1 setting a safety standard in [Decision] 11-12-048 began no later than November 16, 2012. PG&E did not attempt to inform the Commission of the errors until July 3, 2013, a delay of 229 days. This unreasonable delay misled the Commission by allowing a `false statement of fact' to persist uncorrected and was a violation of Rule 1.1. We find that this constitutes a continuing violation within § 2108. Thus, we conclude that this Rule 1.1 violation persisted for 229 days."
The Commission then turned to a discussion of the "Errata":
Concerning the "Title, Content, and Submission Date of the `Errata' Document," the Commission first noted that such a document was prohibited by Rule 1.12(c). It then reasoned: "The record on Line 147 had been closed and the Commission decision issued. At a minimum, in light of the circumstances here, the record needed to be re-opened and corrected, and for a more complete resolution. [Decision] 11-12-048 should have been modified to reflect the correct maximum allowing operating pressure." Lead Counsel's testimony why "he rejected using an Amendment ... [¶] ... is not credible because it is not logical. The Lead Counsel, with decades of experience, admits that notice of the corrections was `absolutely required.' Then, he dismissed use of an amendment, because the record was closed; but the record was equally closed for the errata. No explanation was offered for this flawed logic."
"Further, the `Errata' submitted for filing is a short document with only one page devoted to a brief description of the errors in the MAOP validation records submitted previously for Line 147 and the resulting need to reduce the MAOP from the 365 psig authorized by [Decision] 11-12-048 to 330 psig. The `Errata' did not disclose, for example, when or how PG&E became aware of the errors, the reasons for the errors, or corrective actions that were being taken following discovery of the errors."
"In sum, the Lead Counsel chose to submit for filing a document which, while not provided for in the Rules of Practice and Procedure, is typically used to inform parties of minor changes and corrections in documents, most commonly prior to the original document being offered for the record, but in any event before the Commission issues its decision. This submission had the effect of concealing from the Commission and the parties the actual nature of the document.... [¶] ... [¶] ... In addition to not being timely, ... we find
"Because the document presented by PG&E for filing with the Commission on July 3, 2013, did not clearly convey the nature or significance of the facts set forth within, we find that it was an artifice, as that term is used in Rule 1.1, and misled the Commission. The misleading nature was exacerbated by the submission date of July 3, before a holiday weekend. [¶] We conclude that PG&E's submission of the `Errata' document was a separate violation of Rule 1.1.[
This is how the Commission fixed the penalty:
"[T]he facts of this proceeding require that we impose the maximum fine. Natural gas transmission system safety by this operator has been one of the Commission's highest priorities for three years. The management and legal decision-making regarding the treatment of the discovery of errors in the Line 147 Supporting Information, as reflected in this record, is profoundly disheartening in that it reflects a lack of candor and appreciation of the public interest and the regulatory process.
"Therefore we calculate the fine as follows: For delay in submitting a filing to disclose information regarding errors in pipeline specifications for Line 147, we impose the maximum amount of $50,000 per day as a continuing violation aggravated by the severity of this safety-related offense and the conduct of the utility. We begin the calculation on November 16, 2012, the date by which we find that PG&E should have prepared and submitted a filing to inform the Commission of the significant and material discovery of the records discrepancy and end the calculation on the date that PG&E submitted its Errata document for filing, July 3, 2013, a delay of 229 days. We assess the maximum statutory value [sic] of $50,000 per day for this continuing violation based on the history of this proceeding as set forth above. The resulting fine is $11,450,000.
The Commission then made some "Comments on [the] Alternate Proposed Decision" of Commissioner Ferron, one of which is especially germane: "PG&E ... argues that the Commission must show that PG&E intentionally misled the Commission. However, there is no `intent' element to a Rule 1.1 violation, either implicitly or explicitly. We have previously held that Rule 1.1 violations have occurred where there has been a lack of candor, withholding of information, or failure to correct information or respond fully to data requests. [Fn. to four PUC decisions.]"
In decision No. 14-05-034, the Commission denied PG&E's request for rehearing, rejecting PG&E's arguments that (1) "The Commission erred in finding violations of Rule 1.1 without proof that PG&E intended to misled the Commission"; (2) "The Commission erred in finding `continuing violations' of Rule 1.1 without proof that any misconduct was continuing"; and (3) the penalty imposed violated the prohibitions against excessive fines in the United States and California Constitutions, and also violated the due process clauses of those documents. These are the issues PG&E brings for review.
"Within 30 days after the commission issues its decision denying the application for a rehearing, ... any aggrieved party may petition for a writ of review in the court of appeal ... for the purpose of having the lawfulness of the original order or decision or of the order or decision on rehearing inquired into and determined." (§ 1756, subd. (a).)
"[T]he review by the court shall not extend further than to determine, on the basis of the entire record ..., whether any of the following occurred: [¶] (1) The commission acted without, or in excess of, its powers or jurisdiction. [¶] (2) The commission has not proceeded in the manner required by law. [¶] (3) The decision of the commission is not supported by the findings. [¶] (4) The findings in the decision of the commission are not supported by substantial evidence in light of the whole record. [¶] ... [¶] (6) The order or decision of the commission violates any right of the petitioner under the Constitution of the United States or the California Constitution." (§ 1757, subd. (a).)
Thus, when no constitutional issue is presented, a PUC decision has the same standing as a judgment of the superior court: it is presumed correct, and any party challenging the decision has the burden of proving that it suffers from prejudicial error. (City and County of San Francisco v. Public Utilities Com. (1985) 39 Cal.3d 523, 530 [217 Cal.Rptr. 43, 703 P.2d 381]; Toward Utility Rate Normalization v. Public Utilities Com. (1978) 22 Cal.3d 529, 537 [149 Cal.Rptr. 692, 585 P.2d 491]; Southern California Edison Co. v. Public Utilities Com. (2014) 227 Cal.App.4th 172, 185 [173 Cal.Rptr.3d 120].) Indeed, our Supreme Court has repeatedly called the presumption in favor of the Commission's decision a "strong" one. (Greyhound Lines, Inc. v. Public Utilities Com. (1968) 68 Cal.2d 406, 410 [67 Cal.Rptr. 97, 438 P.2d 801] ["There is a strong presumption of validity of the commission's decisions...."]; Pacific Tel. & Tel. Co. v. Public Util. Com. (1965) 62 Cal.2d 634, 647 [44 Cal.Rptr. 1, 401 P.2d 353] ["strong presumption of the correctness of the findings ... of the commission, which may choose its own criteria or method of arriving at its decision"].)
But even the presence of a constitutional dispute does not require the reviewing court to adopt de novo or independent review. Even there, "the question of the weight of the evidence in determining issues of fact lies with the commission acting within its statutory authority; the `judicial duty to exercise an independent judgment does not require or justify disregard of the weight which may properly attach to findings upon hearing and evidence.'" (Pacific Tel. & Tel. Co. v. Public Util. Com., supra, 62 Cal.2d 634, 646.) In other words, judicial reweighing of evidence and testimony is ordinarily not permitted. (See, e.g., Toward Utility Rate Normalization v. Public Utilities Com., supra, 22 Cal.3d 529, 538 ["... `When conflicting evidence is presented from which conflicting inferences can be drawn, the commission's findings are final.'"]; Pacific Tel. & Tel. Co. v. Public Util. Com., supra, at p. 647 [findings which are final include those involving "conflicting evidence [or] undisputed evidence from which conflicting inferences may reasonably be drawn"]; Cal. Portland Cement Co. v. Public Util. Com. (1957) 49 Cal.2d 171, 175 [315 P.2d 709] ["The weighing of whatever factors may have tended [to support an implied finding by the PUC] was a matter within the exclusive jurisdiction of the commission."]; The Utility Reform Network v. Public Utilities Com. (2014) 223 Cal.App.4th 945, 959 [167 Cal.Rptr.3d 747]; In re Groundwater Cases (2007) 154 Cal.App.4th 659, 681 [64 Cal.Rptr.3d 827];
To accomplish the overturning of a Commission finding for lacking the support of substantial evidence, the challenging party must demonstrate that based on the evidence before the Commission, a reasonable person could not reach the same conclusion. (Clean Energy Fuels Corp. v. Public Utilities Com. (2014) 227 Cal.App.4th 641, 649 [174 Cal.Rptr.3d 297]; The Utility Reform Network v. Public Utilities Com., supra, 223 Cal.App.4th 945, 959.) It is for this reason that the Commission's factual findings are almost always treated as "`conclusive'" (American Toll Bridge Co. v. Railroad Com. (1938) 12 Cal.2d 184, 192 [83 P.2d 1]), "final and not subject to review." (City and County of San Francisco v. Public Utilities Com., supra, 39 Cal.3d 523, 530.)
The deference may, if anything, be even greater with regulations promulgated by the agency. "[T]he PUC's interpretation of its own regulations and decisions `is entitled to consideration and respect by the courts. [Citation.]... "`A court is more likely to defer to an agency's interpretation of its own regulation than to its interpretation of a statute, since the agency is likely to be intimately familiar with regulations it authored and sensitive to the practical implications of one interpretation over another.'" [Citation.]'" (Clean Energy Fuels Corp. v. Public Utilities Com., supra, 227 Cal.App.4th 641, 649; see The Utility Reform Network v. Public Utilities Com., supra, 223 Cal.App.4th 945, 958 ["The Commission's interpretation of its own rules and regulations `is entitled to consideration and respect by the courts.'"].)
All that being said, with either statute or regulation, the ultimate decision is with the courts. (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 11-12 [78 Cal.Rptr.2d 1, 960 P.2d 1031]; Carmona v. Division of Industrial Safety (1975) 13 Cal.3d 303, 310 [118 Cal.Rptr. 473, 530 P.2d 161]; PG&E Corp. v. Public Utilities Com., supra, 118 Cal.App.4th 1174, 1194-1195.)
As shown by the captions in its petition, this is how PG&E frames the issues for decision: (1) "The Commission Erred in Holding That a Violation of Commission Rule 1.1 Does Not Require Proof of an Intent to Mislead the Commission"; (2) "The Commission Erred in Holding That Continuing Violations of Rule 1.1 May Be Found Without Proof of Continuing Misconduct"; and (3) "The Commission's Decision Violates PG&E's Rights Under the California and United States Constitution," specifically: "The Commission found PG&E guilty of Rule 1.1 violations that the Commission failed to identify in advance of the hearing, in contravention of the Due Process Clause, and imposed fines of millions of dollars for unintentional reporting and filing errors that caused no harm and were not accompanied by any improper intent, in violation of the Excessive Fines Clause."
PG&E's opening contention attacks the PUC's conclusion that "there is no `intent' element to ... Rule 1.1." PG&E asserts that this conclusion suffers from numerous defects, in connection with which PG&E advances five supporting arguments, which will hereafter be referred to as "subarguments."
It is clear from some of the language used by PG&E ("offense," "strict liability," "mens rea"), its copious citation of criminal authorities, and its invocation of constitutional provisions linking excessive fines to cruel and/or unusual punishment,
It is true that, according to repeated pronouncements from our Supreme Court, "[t]he prevailing trend in the law is against imposing criminal liability without proof of some mental state where the statute does not evidence the Legislature's intent to impose strict liability." (In re Jennings (2004) 34 Cal.4th 254, 267 [17 Cal.Rptr.3d 645, 95 P.3d 906]; accord, Stark v. Superior Court (2011) 52 Cal.4th 368, 393 [128 Cal.Rptr.3d 611, 257 P.3d 41];
"... `While ... civil penalties may have a punitive or deterrent aspect, their primary purpose is to secure obedience to statutes and regulations imposed to assure important public policy objectives.'" (California Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal.4th 284, 294-295 [65 Cal.Rptr.2d 872, 940 P.2d 323], quoting Kizer v. County of San Mateo (1991) 53 Cal.3d 139, 147-148 [279 Cal.Rptr. 318, 806 P.2d 1353].) "It is ... well accepted that a state may impose reasonable penalties as a means of securing obedience to statutes validly enacted under the police power.... Imposition of civil penalties has, increasingly in modern times, become a means by which legislatures implement statutory policy." (Hale v. Morgan (1978) 22 Cal.3d 388, 398 [149 Cal.Rptr. 375, 584 P.2d 512].) "[T]he Legislature may constitutionally impose reasonable penalties to secure obedience to statutes enacted under the police power, so long as those enactments are procedurally fair and reasonably related to a proper legislative goal." (Kinney v. Vaccari (1980) 27 Cal.3d 348, 352 [165 Cal.Rptr. 787, 612 P.2d 877].)
PG&E characterizes the Errata as an innocent mistake "made ... in complete good faith," which "did not cause any harm and did not pose any risk to the Commission, its staff, any party, or the public." This completely misperceives what the PUC believed was at issue.
This mirrors the position of the Commission. In language especially pertinent to our inquiry, since at least 1998 the Commission has taken the position that "The purpose of a fine is to go beyond restitution to the victim and to effectively deter further violations.... [¶] Effective deterrence ... is particularly important against violations which could result in public harm, and particularly against those where severe consequences could result." (Enforcement Rules, supra, 84 Cal.P.U.C.2d 167, 188.) Nor is "harm" narrowly restricted to "the victim" — or even the general "public": "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.... [¶] ... [¶] Such compliance is absolutely necessary to the proper functioning of the regulatory process." (Ibid.)
The same reasoning dooms PG&E's subargument 3, with its reference to the California Rules of Court and the Business and Professions Code. (See fn. 22, post.) The Commission's power to impose monetary deterrent sanctions to ensure compliance with such an unquestionably valid jurisdictional power cannot be overcome by PG&E's reliance upon arguments based on supposedly analogous statutes. PG&E is correct that the statutory tort of deceit does have a scienter requirement. (Civ. Code, § 1710; Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 [49 Cal.Rptr.2d 377, 909 P.2d 981]; 5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, §§ 800-807, pp. 1157-1163.) But that requirement is not invariable, and does not exclude the existence of actionable fraud that does not require a mental element. Our state's unfair competition law (Bus. & Prof. Code, § 17200 et seq.) is one example that comes to mind. (See Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 181 [96 Cal.Rptr.2d 518, 999 P.2d 706] ["[T]he plaintiff need not show that a UCL defendant intended to injure anyone through its unfair or unlawful conduct. The UCL imposes strict liability when property or monetary losses are occasioned by conduct that constitutes an unfair business practice."]; Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499, 520 [63 Cal.Rptr.2d 118] [same].) "Moreover, tort law recognizes a claim for negligent misrepresentation, which allows recovery in the absence of scienter or intent to defraud (Civ. Code, § 1710, subd. 2; Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173-174 [132 Cal.Rptr.2d 490, 65 P.3d 1255]) and attaches liability to `[t]he suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact' (Civ. Code, § 1710, subd. 3). And tort law also recognizes that a party having exclusive knowledge of information materially affecting the value of a transaction may have a duty to disclose that information to the other party even in the absence of a fiduciary relationship. (5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 796, pp. 1151-1152.)" (Los Angeles Unified School Dist. v. Great American Ins. Co. (2010) 49 Cal.4th 739, 750, fn. 5 [112 Cal.Rptr.3d 230, 234 P.3d 490].)
As no misdemeanor or felony prosecution confronts PG&E, we conclude the public protection approach furnishes a more useful and reliable analogue than one aspect of statutory tort law. The Commission is not concerned with redressing a private wrong to an individual, but with protecting the safety of the general public — not to mention the integrity of the statewide regulatory authority exercised by the Commission.
The matter of PG&E's subargument 2, which is based on the PUC's own prior decisions, is more problematic. PG&E tells us: "[T]he Commission itself has in prior decisions, contrary to its holding in this case, refused to find a violation of Rule 1.1 or impose sanctions when the alleged misstatement `was an oversight rather than a deliberate attempt to mislead us,' [citation] or when the record did not `demonstrate an intent to mislead the Commission.'"
The Commission responds that its prior applications of Rule 1.1 (and its predecessor version, rule 1) furnish additional support for concluding that scienter is not a sine qua non.
Although the Commission maintains that the line of its decisions is unbroken and true, and therefore entitled to deference, we cannot agree. The nonsystematic examination we have made, based on the decisions cited by the parties and amici curiae, leaves us with the impression that the Commission's applications of Rule 1.1 are hardly linear. One illustration from the matter before us will illustrate the point.
When the Commission denied PG&E's application for rehearing, it made the categorical statement that "we have never held that a purposeful intent is a prerequisite to impose Rule 1.1 sanctions." Amici curiae responds with a 2002 decision where the Commission made the equally categorical pronouncement that "Rule 1 violations require purposeful intent, recklessness, or gross negligence in regard to communications with the Commission." (Application of Pacific Fiber Link, L.L.C. for Modification of its Certificate of Public Convenience and Necessity (Aug. 22, 2002) Cal.P.U.C. Dec. No. 02-08-063 [2002 Cal.P.U.C. Lexis 533, p. *29].)
All of this was reiterated in a 2004 decision: "The Commission has recently held that Rule 1 violations require purposeful intent, recklessness, or gross negligence in regard to communications with the Commission. (See D.02-08-063....) In D.94-11-018, 57 CPUC2d 176, the Commission recognized that a line of prior decisions held that situations involving a failure to correctly cite a proposition of law, a lack of candor, or withholding information, and a failure to correctly inform and to correct mistaken information are potential Rule 1 violations, and clarified that a Rule 1 violation can result from such conduct if it is reckless or grossly negligent." (Order Instituting Investigation into Southern California Edison Company's Electric Line Construction, Operation, and Maintenance Practices (Apr. 22, 2004) Cal.P.U.C. Dec. No. 04-04-065 [2004 Cal.P.U.C. Lexis 207, p. *53].)
Although it may be literally correct that the Commission has never expressly held that Rule 1.1 cannot be violated unless there is intent, recklessness, or gross negligence, one could conclude that it had. That conclusion would only be fortified by considering decisions where the Commission had — most recently during the period while PG&E's application for rehearing was pending — declined to impose Rule 1.1 sanctions because a utility's misstatement was treated as "an oversight rather than a deliberate attempt to mislead." (In the Matter of the Application of Valencia Water Company (Feb. 27, 2014) Cal.P.U.C. Dec. No. 14-02-041 [2014 Cal.P.U.C. Lexis 109, p. *13, fn. 18].); see Investigation on the Commission's own motion (Nov. 13, 2003) Cal.P.U.C. Dec. No. 03-11-023 [2002 Cal.P.U.C. Lexis 1046, p. *42] [common carrier not sanctioned because evidence did not establish that carrier "knowingly and willfully filed false quarterly reports that understated revenue"]; Application of Pacific Gas and Electric Co. (1984) 16 Cal.P.U.C.2d 5, 16), or an "honest mistake" (Investigation on the Commission's Own Motion (Jan. 29, 2009) Cal. P.U.C. Dec. No. 1.09-01-017 [2009 Cal.P.U.C. Lexis 5, pp. *12-*13]). But against these comments is the 2009 decision in which the Commission determined that a utility "is subject to a penalty for its violation of Rule 1.1, even if the violation was inadvertent." (In the Matter of the Application of Bigredwire.com, Inc. (Apr. 16, 2009) Cal.P.U.C. Dec. No. 09-04-009 [2009 Cal.P.U.C. Lexis 197, p. *20].)
In the 1992 decision, the Commission determined that a gas pipeline utility had improperly assigned certain gas pipeline capacity rights to an affiliate, further determining that the utility had violated rule 1 by misrepresenting the status of the affiliate's "transportation rights" in a report filed with the Commission. (Order Instituting Rulemaking (1992) 43 Cal.P.U.C.2d 498, 501-502].) The Commission denied the utility's application for rehearing on the issue of whether it had violated rule 1. The language used in doing so merits quotation at length:
"There is sufficient evidence and legal basis to support our determination that SoCalGas violated Rule 1 by misleading the Commission as to the status of the PITCO transportation arrangements in the report it filed with the Commission on December 31, 1991. SoCalGas executed the capacity assignment on December 26, 1991, but did not make this fact known to the Commission in the report it filed on December 31, 1991. Rather, SoCalGas incorrectly informed the Commission that it was `contemplating' such an assignment.... Even after the assignment became effective on January 1, 1992, SoCalGas failed on its own to advise the Commission of the assignment, despite the claims that `[a]s a business matter, [SoCalGas] always communicate[s] closely with the pertinent staff on these matters whether or not there is a formal requirement that [SoCalGas] ... submit a filing.' ... Apparently, ... the assignment was discovered by accident during the course of the implementation proceedings....
"Thus, from the record, a strong evidentiary inference can be drawn that SoCalGas did not intend to inform the Commission about the assignment of interstate capacity to an affiliate.... [¶] Interestingly, SoCalGas also did not address the assignment in its testimony [before the PUC] .... Absent the Commission's accidental discovery of this illegal assignment, the inaccurate language in the ... report constituted a continuing misrepresentation of the true facts ... and would have misled the Commission that the assignment was only being contemplated. [¶] Therefore, by failing to provide the correct
"Such a conclusion is supported by [the 1990 decision]. In this decision, the Commission found a Rule 1 violation against a cellular telephone company for taking advantage of a `mistake' it had introduced and for failing to bring this `mistake' to the attention of the Commission within a reasonable time." (Order Instituting Rulemaking (1992) 45 Cal.P.U.C.2d 241, 242, citations omitted.)
The 2001 decision involved the failure to disclose relevant information to the Commission. The PUC refused to accept the utility's claim that this was an innocent oversight:
"There is no dispute that Sprint PCS failed to disclose the information ... sought by the staff.... Sprint PCS' major argument is that the omission was purely unintentional and as such, does not qualify as a Rule 1 violation.... [¶] Even to the extent we were to presume that Sprint PCS did not intentionally set out to deceive the staff, the results of its actions did have the effect of misleading the staff." (Order Instituting Rulemaking (Aug. 2, 2001) Cal.P.U.C. Dec. No. 01-08-019 [2001 Cal.P.U.C. Lexis 653, pp. *12-*13].)
"Merely because a party initially withholds information ... and then later discloses the information ... does not necessarily mean that the initial nondisclosure was purely unintentional. The timing or manner in which information is disclosed could potentially have a material effect on the outcome .... If a party is able to simply claim ignorance of the initial omission, the party would ... escape any sanctions or penalties. [¶] In any event, the question of intent to deceive merely goes to the question of how much weight to assign to any penalty that may be assessed. The lack of direct intent to deceive does not necessarily, however, avoid a Rule 1 violation." (Cal.P.U.C. Dec. No. 01-08-019, supra, 2001 Cal.P.U.C. Lexis 653 at p. *14].)
So, even if the interpretation of sections 1701 and 2107, together with Rule 1.1, is not a subject to which the PUC brings a technical expertise derived from its regulatory functions, the Commission is nevertheless entitled to its opinion concerning the practical realities. Certainly no court can hope to equal the PUC's knowledge of what will "mislead" it. No court can have an institutional memory of what constitutes "an artifice" gained from familiarity with the practices and procedures before the PUC. This case furnishes a perfect illustration: How can this court presume to think it knows better than
True, the PUC's interpretation of Rule 1.1 may have been shrouded in a haze of divergent and even differing formulations. Yet the subject addressed by the rule — ensuring the transmission of truthful information to the Commission — is obviously central to the proper discharge of the PUC's responsibilities. The Commission's history of inexactitude or infelicitously expressing what will be deemed a violation of Rule 1.1 cannot be used to vitiate a vital deterrent. And thus we reject PG&E's subargument 2.
That leaves PG&E's speculative subargument 5, which rests upon the assumption that the PUC has used Rule 1.1 to penalize "representations made by a party in complete good faith." As previously shown, the factual predicate of that assumption cannot be indulged "without a whole violation of the standards governing our limited scope of review." (See fn. 20, ante.) Another erroneous underlying assumption is the unduly narrow view of the Commission's legitimate deterrence powers. The remainder of subargument 5 will be addressed while analyzing PG&E's contentions that the Commission used an improper concept of what constitutes a continuing violation, and that the aggregate amount of the penalties imposed violates the excessive fine prohibitions of the United States and California Constitutions.
We restate our conclusions:
The operative statutory language is the plain language of section 2107. The Legislature knows how to specify how a mental state shall be required for an act or omission to warrant a financial consequence, and its decision not to include such qualifying words as "willfully," or "knowingly" when that statute was enacted indicates that it did not mean to impose a scienter requirement for a violation of "any part or provision of any order, decision, decree, rule, direction, demand, or requirement of the commission." This court must respect that omission, "not rewrite the statute to conform to an assumed intention which does not appear from its language." (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 573 [71 Cal.Rptr.2d 731, 950 P.2d 1086].)
By itself, the diffuse and meandering construction the Commission has given to Rule 1.1 might deserve only the merest modicum of deference. Yet that construction exists within the context of the Commission operating under the broad license of section 701, and exercising its "comprehensive jurisdiction over questions of public health and safety arising from utility operations." (San Diego Gas & Electric Co. v. Superior Court, supra, 13 Cal.4th 893, 924.) The means chosen by the Commission to police that expansive domain, and enforce control of proceedings before it, is unquestionably a matter that bears a reasonable relation to the purposes and language of the statutes under which the PUC operates, and should receive a measure of judicial recognition and consideration, founded upon appreciation of the practical realities of the Commission administering its vast and variegated jurisdiction.
In any event, our purely independent review would bring us to the same conclusion. Without any input from the Commission, and looking solely at the relevant statutory language, we cannot discern an unmistakable legislative desire for a scienter requirement.
PG&E's second contention, under the heading "The Commission Erred in Holding that Continuing Violations of Rule 1.1 May be Found Without Proof of Continuing Misconduct," proceeds as follows:
"Having found that PG&E's reporting and filing errors constituted a violation of Rule 1.1 despite the lack of any direct proof of intent to mislead, the Commission then held that those violations should be deemed `continuing' under ... § 2108, warranting a cumulative penalty of $50,000 per day.... In particular, it determined that PG&E's failure to disclose the corrected pipeline information represented a `continuing violation' from
"A `continuing violation' occurs, by definition, only when a party has engaged in `a continuing course of unlawful conduct' over a period of time. Richards v. CH2M Hill, Inc., 26 Cal.4th 798, 823 [111 Cal.Rptr.2d 87, 29 P.3d 175] (2001). This principle, affirmed in scores of cases from the California Supreme Court and others, requires that the party be shown to have engaged in a course of repeated or ongoing misconduct, such that the provision in question is continually violated over a certain period of time. Id.; see also Flowers v. Carville, 310 F.3d 1118, 1126 (9th Cir. 2002); Ward v. Caulk, 650 F.2d 1144, 1147 (9th Cir. 1981); Birschtein v. New United Motor Mfg., Inc., 92 Cal.App.4th 994, 1005 [112 Cal.Rptr.2d 347] (2001). In other words, for a `continuing violation' to be found, the party must have `continually' violated the provision at issue, from an identifiable start date through an identifiable end date.
"The Commission misunderstood, and as a result misapplied, this basic concept. It held that a `continuing violation' may exist over any period of time that a party, once adjudged to have violated a rule, fails to fully and completely correct the breach.... On that basis, it determined that in this case PG&E's failure to correct the inaccurate pipeline information was `continuing' throughout the period that PG&E might have but did not remedy the error through a formal notification to the Commission. [Citation.]
"That conclusion cannot be reconciled with the cases discussed above, which recognize that a `continuing violation' is characterized by `a continuing course of unlawful conduct,' Richards, 26 Cal.4th at 823, not `by continual ill effects from the original violation,' Ward, 650 F2.d at 1147. Thus, neither `the lingering effect of an unlawful act' nor `the mere failure to right a wrong' constitutes a continuing violation. Earle v. D.C., 404 U.S. App.D.C. 1 [707 F.3d 299, 306] (D.C. Cir. 2012); see also Garcia v. Brockway, 526 F.3d 456, 462 (9th Cir. 2008) (en banc); Cowell v. Palmer Twp., 263 F.3d 286, 293 (3d Cir. 2001). Here, even assuming that the Commission was `misled' by the inaccurate information concerning the pipeline specification, the violation occurred and was completed at the time the inaccuracy was discovered. While the effect of the violation might arguably have `linger[ed]' in some sense until PG&E communicated with Commission staff in early 2013 or even until it filed the Errata, PG&E's failure to communicate with the
PG&E's reasoning was quoted at length to demonstrate why it must be rejected.
The decisions cited by PG&E deal with the idea of a "continuing violation" as a judicially created doctrine that will toll the statute of limitations, specifically in anti-discrimination actions. This is shown by the full quotation from the decision of our Supreme Court instanced by PG&E as the definitional exemplar of what constitutes a "continuing violation": "Thus, when an employer engages in a continuing course of unlawful conduct under the FEHA by refusing reasonable accommodation of a disabled employee or engaging in disability harassment, and this course of conduct does not constitute a constructive discharge, the statute of limitations begins to run, not necessarily when the employee first believes that his or her rights may have been violated, but rather, either when the course of conduct is brought to an end, as by the employer's cessation of such conduct or by the employee's resignation, or when the employee is on notice that further efforts to end the unlawful conduct will be in vain." (Richards v. CH2M Hill, Inc., supra, 26 Cal.4th 798, 823.)
Section 2108 is no outlier. "[M]any statutes expressly authorize penalties for continuing violations...." (Boorstein v. CBS Interactive, Inc. (2013) 222 Cal.App.4th 456, 470, fn. 3 [165 Cal.Rptr.3d 669].) Numerous codes have such provisions, specifying that a continuing violation may occur on a daily basis. (See, e.g., Bus. & Prof. Code, § 13610; Corp. Code, § 28900; Fin. Code, §§ 2151.1, 5310, subd. (b)(2), 18349.5, subd. (i)(3), 31900; Gov. Code,
Moreover, it is clear from section 2108 and the other penalty-related statutes that the Legislature left it to the Commission to decide what amounts to a violation of "any order, decision, decree, rule, direction, demand, or requirement of the commission." (See § 2101 ["The Commission shall see that ... statutes ... affecting public utilities ... are enforced and obeyed, and that violations thereof are promptly prosecuted and penalties due ... recovered and collected."].) The statutory scheme clearly accepts that the PUC will be able to identify when a violation amounts to a continuing one. How the Commission does so would clearly be another matter. (See Southern California Edison Co. v. Peevey, supra, 31 Cal.4th 781, 796; Greyhound Lines, Inc. v. Public Utilities Com., supra, 68 Cal.2d 406, 410-411.) As such, it is entitled to considerable deference by a reviewing court.
PG&E's proffered definition of a continuing violation would apply only to instances of positive acts, and not cover a persistent failure to act, such as the Commission found here. If accepted, PG&E's "failure to correct a wrong" approach would eviscerate the Commission's power to require continual self-reporting by virtually destroying the Commission's power to sanction noncompliance. It amounts to another attempt to gut the PUC's vital deterrent power of enforcing compliance with its orders. Instead of treating a violation as occurring daily, as expressly authorized by section 2108, PG&E would truncate that power by rewriting the statute to make the maximum penalty $50,000 (or in this case, $100,000 for the two violations found by the Commission). Indeed, PG&E's definition would constitute such a severe restriction on the PUC's power to enforce compliance with its orders that it would produce another result by rewarding parties who succeed in misleading the Commission by their continued noncompliance but who, as PG&E would have it, "[do] not `mislead' the Commission any further than [has] already occurred." This is another outlandish outcome we must reject. (Eel River Disposal & Resource Recovery, Inc. v. County of Humboldt, supra, 221 Cal.App.4th 209, 227; Reliable Tree Experts v. Baker, supra, 200 Cal.App.4th 785, 796-797; Friends of Bay Meadows v. City of San Mateo, supra, 157 Cal.App.4th 1175, 1191.) Were all this not enough, we note that had the Legislature intended such a result, it knew how to have employed language to
The first of PG&E's two constitutional claims proceeds as follows: "Due process requires, at its most basic, that a party be given fair notice of allegations of misconduct prior to any adjudicatory hearing.... [¶] That essential requirement was flouted here. The Show Cause Order in this matter gave notice of two specific alleged violations of Rule 1.1: (i) whether PG&E attempted to mislead the Commission by titling its disclosure filing as an `Errata' and (ii) whether PG&E attempted to mislead the Commission by filing on July 3, 2013, `the day before a summer holiday weekend.' [Citation.] Nothing in the Order indicated that the Commission would also consider whether PG&E had separately violated Rule 1.1 by failing to disclose the corrected pipeline specification information a month after the first preliminary information was discovered, or that PG&E might face continuing violation sanctions based on any breach of disclosure or filing obligations." This portrayal of PG&E as the victim of bureaucratic bushwhacking is unsound.
To begin with, due process does not require any particular form of notice. (Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 990 [4 Cal.Rptr.2d 837, 824 P.2d 643]; Drummey v. State Bd. of Funeral Directors (1939) 13 Cal.2d 75, 80 [87 P.2d 848]; see Litchfield v. County of Marin (1955) 130 Cal.App.2d 806, 813 [280 P.2d 117] ["there is no constitutional mandate ... which makes specific how ... notice is to be given or which form it must take"].) The details can be flexible, "depend[ing] on [the] circumstances ... var[ying] with the subject matter and the necessities of the situation." (Sokol v. Public Utilities Commission (1966) 65 Cal.2d 247, 254 [53 Cal.Rptr. 673, 418 P.2d 265]; see Haas v. County of San Bernardino (2002) 27 Cal.4th 1017, 1037 [119 Cal.Rptr.2d 341, 45 P.3d 280] ["The requirements of due process are flexible, especially where administrative procedure is concerned ...."].) All that is required is that the notice be reasonable. (Jonathan Neil & Assoc., Inc. v. Jones (2004) 33 Cal.4th 917, 936, fn. 7 [16 Cal.Rptr.3d 849, 94 P.3d 1055]; Drummey v. State Bd. of Funeral Directors, supra, at pp. 80-81.)
As PG&E sees it, the Commission's OSC alerted PG&E only to the distinctly minor offenses of choosing the wrong title for the document it submitted, and making that submission on the eve of a major summer holiday. This characterization is inaccurate. The OSC told PG&E that its attempted filing of the Errata "raises procedural and substantive issues," which the Commission called "serious issues." The OSC notified PG&E that the Errata was procedurally improper because it went beyond "correcting minor typographical or computational errors" and "could be interpreted as attempting to create an inaccurate impression of a routine correction." The OSC also notified PG&E that the Errata was perceived by the Commission as "making substantive changes to a previously filed application" by "revealing a substantial error in an application upon which the Commission has relied in issuing a decision." In sum, a fair reading of the OSC discloses that the PUC was not merely concerned with how the filing was titled.
What did attract the Commission's attention was the substance of the document. The Commission's language — referring to "substantive issues," "substantive changes to a previously filed application," and "revealing a substantial error in an application upon which the Commission has relied in issuing a decision" — goes far beyond the single word chosen for a caption. The Commission was obviously paying close attention to the contents of PG&E's document. And the wording of the OSC leaves no room for doubt on
Moreover, our inquiry does not have to end with the OSC. As already recounted, the briefs filed by SED and TURN prior to the Commission's initial decision show that those entities construed the OSC as putting PG&E on notice as to whether it had failed to comply with a standing order that the Commission be promptly notified of matters relating to pipeline safety, and whether PG&E's delay in complying with that directive constituted a continuing violation within the plain scope of section 2108. So did each of the proposed decisions submitted by Commissioner Ferron and the ALJ. Following the Commission's initial decision, PG&E identified the supposed lack of notice as one of the grounds on which it sought a rehearing. The point was contested by TURN, the SED, and the Cities of San Bruno and San Carlos in the written opposition to PG&E's request. The Commission held a hearing on PG&E's request, at which it heard PG&E's Chairman and CEO and its vice-president of gas transmission, maintenance and construction earnestly assert PG&E's good faith and complete lack of intent to mislead the commission.
The situation here is not a true variance situation because there is no real divergence between pleading and proof, but at most a divergence between how the OSC can be read. No one was obligated to take PG&E's word that the notice provided by the OSC was inadequate. Certainly the PUC did not, nor did the real parties in interest. And when PG&E sought rehearing, it did not claim that its ability to present a defense had been compromised. It made nothing akin to an offer of proof, identifying no testimony or other evidence it would have presented had it realized the full scope of what the OSC
PG&E's final contention is based on the application of the excessive fine prohibitions of the United States and California Constitutions (quoted at fn. 14, ante) to civil penalties imposed by an administrative agency. (See People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2005) 37 Cal.4th 707, 727-729 [36 Cal.Rptr.3d 814, 124 P.3d 408]; Ojavan Investors, Inc. v. California Coastal Com. (1997) 54 Cal.App.4th 373, 396-397 [62 Cal.Rptr.2d 803].)
In December 1998, the PUC promulgated detailed guidelines for the process of calculating fines. (See Enforcement Rules, supra, 84 Cal.P.U.C.2d 167, 188-190.) "[T]he two general factors used by the Commission in setting fines are: (1) severity of the offense and (2) conduct of the utility." (Id. at p. 188.) The "conduct of the utility" includes its actions to "Prevent a Violation," "Detect a Violation," and "Disclose and Rectify a Violation." (Id. at p. 189.) The Commission will also consider the "Financial Resources of the Utility" and the "Totality of the Circumstances in Furtherance of the Public Interest." (Ibid.) "In all cases, the harm will be evaluated from the perspective of the public interest." (Ibid.)
We have encountered a number of decisions where the PUC systematically discussed various of these factors in calculating fines. (E.g., Investigation on the Commission's Own Motion (Sept. 19, 2009) Cal.P.U.C. Dec. No. 13-09-028 [2013 Cal.P.U.C. Lexis 514]; Investigation on the Commission's Own Motion (Sept. 18, 2008) Cal.P.U.C. Dec. No. 08-09-038 [2008 Cal.P.U.C. Lexis 401]; Cal.P.U.C. Dec. No. 04-04-065, supra, 2004 Cal.P.U.C. Lexis 207; Cal.P.U.C. Dec. No. 01-08-019, supra, 2001 Cal.P.U.C. Lexis 653; Cal.P.U.C. Dec. No. 95-04-43.) The Commission did not follow that process here, but PG&E does not contend that this omission makes the fine order invalid.
Adverting generally to these considerations, PG&E's argument runs as follows: "[The Excessive Fines] Clauses prohibit fines that are `grossly disportiona[te]' to the underlying violation. United States v. Bajakajian[, supra,] 524 U.S. 321, 324 .... Whether a fine is `grossly disproportional' is determined by (i) the extent of the harm caused, (ii) the gravity of the offense relative to the fine, (iii) the relationship of the violation to other illegal activity, and (iv) the availability of other penalties and the maximum penalties that could have been imposed. [Citation]; People v. R.J. Reynolds Tobacco Co.[, supra,] 37 Cal.4th 707, 728 .... Of perhaps greater importance, however, is the disparity between the fine and any actual damages resulting from the underlying offense: where the amount of the fine is many multiples greater than actual damages, the penalty is more likely unconstitutional. [¶] The fines imposed by the Commission in this case ... are the largest ever imposed by the Commission for such a violation of Rule 1.1, and yet none of the factors relevant to the `grossly disproportionate' analysis supports such a massive penalty.
"First, the adjudicated violations did not cause any harm and did not pose any risk to the Commission, its staff, any party, or the public. [Citation.] The Commission can point only to a generalized `potential for harm,' that cannot
"Second, although `misleading' a regulatory body is certainly a serious matter in general, in this case PG&E did not act with any intent to deceive, or indeed with any culpable intent whatsoever....
"Third, the violations here did not contribute to or result from any other illegal activity. To the contrary, the pipeline information was discovered while PG&E was performing safety-related inspections — conduct undeniably intended to advance public safety. [Citation.]
"Finally, the fines in this case represented not merely the maximum allowed under state law, but in fact were greater than that permitted by statute because of the Commission's erroneous interpretation of what constitutes a `continuing violation.' [Citation.] Particularly given the vast disparity between the damages caused by the violations (at most, the costs associated with additional Commission proceedings) and the nearly $15 million fines, those fines cannot be reconciled as consonant with the Excessive Fines Clauses of either the California or Federal Constitution."
Much of this is familiar. PG&E's argument that "the adjudicated violations did not cause any harm and did not pose any risk to the Commission, its staff, any party, or the public" is literally true, but it completely misperceives what was at issue. "No harm no foul" may work in the schoolyard, but it is no principle for the maintenance of public safety. Given the context here, PG&E's emphasis on "actual damages" is dismaying, antithetical to the entire concept of deterrence. The Commission takes a very dim view of denying it information, treating it as a factor in aggravation when it comes to fixing penalty. (See Cal.P.U.C. Dec. No. 13-09-028, supra, 2013 Cal.P.U.C. Lexis 514 at pp. *51-*52 ["The withholding of relevant information causes substantial harm to the regulatory process, which cannot function effectively unless participants act with integrity at all times.... [T]his criterion weighs in favor of a significant fine."].)
We have already determined that virtually denuding the Commission's jurisdiction would be a consequence of the way PG&E wants to have Rule 1.1, as well as sections 2107 and 2108, interpreted. The notion that a civil penalty cannot be imposed if "the potential risk never materialized ..." would encourage utilities not to self-report, and, by stripping the Commission's sanction power, would make a Commission order to self-report essentially meaningless — indeed, it would reward defiance of the Commission. PG&E will not prevail in its attempt to repackage in constitutional wrapping the same intent-based arguments we have already rejected.
According to the Commission's enforcement rules — which, not incidentally, are never mentioned by PG&E — PG&E was on notice that a violation of Rule 1.1 that did not cause actual physical harm to people or property would be treated almost as severely as one that did. (See Enforcement Rules, supra, 84 Cal.P.U.C.2d 167, 188.) The PUC here was confronting a violation of its order — a violation that, beyond disputing the mental state issue, PG&E makes no real attempt to deny — concerning the safe operating pressure of a pipeline transmitting gas through heavily inhabited urban areas. PG&E argued that the violation was inadvertent. The Commission found that explanation, delivered through Lead Counsel, lacked credibility. That determination, together with its decision to impose penalties, evidence the Commission's conclusion that PG&E had not acted in good faith.
At the end of this proceeding, PG&E's CEO, Earley, told the Commission: "The fact that I'm here today means that we failed to meet your expectations in how we communicated with you." In the exercise of its "comprehensive jurisdiction over questions of public health and safety arising from utility operations" (San Diego Gas & Electric Co. v. Superior Court, supra, 13 Cal.4th 893, 915, 924), the Commission determined that that failure was sufficiently egregious to warrant a sanction of $14.35 million. That determination comes to us with a strong presumption of correctness, a presumption that extends to all factual determinations, and to the Commission's construction of sections 2107 and 2108, and Rule 1.1, all of which deal with the conduct of regulatory practices and practicalities concerning which the Commission is more familiar and more expert.
Exercising our independent judgment as specified by section 1760, the penalties imposed do not strike us as "grossly disproportional to the gravity" of PG&E's tardiness in self-reporting information that the Commission and the public were entitled to know. (United States v. Bajakajian, supra, 524 U.S. 321, 324, italics added.) "[W]e cannot conclude that the unconstitutionality of the penalty [imposed by the PUC] clearly, positively and unmistakably appears." (City and County of San Francisco v. Sainez, supra, 77 Cal.App.4th 1302, 1321.) PG&E has failed to demonstrate a violation of the excessive fine provision of either the United States or the California Constitution.
Decisions Nos. 13-12-053 and 14-05-034 are affirmed.
Kline, P. J., and Miller, J., concurred.
The Milpitas Terminal appears to be something like a district center responsible for, among other things, administration, maintenance, and emergency response for its vicinity. It was the nearest such center and the epicenter of PG&E activity before and during the explosion. It was also a terminus for intrastate gas transmission pipelines, and the junction for routing gas north to San Francisco. (Investigation Rep., supra, pp. 7, 72, 74-76, 86, 95-97; Cal. P.U.C. Dec. No. 1.12-01-007, supra, 2012 Cal.P.U.C. Lexis 39 at pp. *2-*3.) According to the Commission: "Gas coming into Milpitas Terminal supplies the vast majority of customers along the San Francisco Peninsula." (Order Instituting Rulemaking on the Commission's Own Motion (Sept. 8, 2011) Cal.P.U.C. Proposed Dec. No. 11-09-006, p. 1.)
The explosion also produced a flurry of responsive activity from the Legislature. (See Stats. 2011, chs. 519 [adding §§ 956.5, 957, 958, 958.5, 959, 969, requiring every gas corporation to meet annually with local fire departments, install automatic shutoff valves, to "prepare and submit to the commission a proposed comprehensive pressure testing implementation program for all intrastate transmission lines," to file biannual "a gas transmission and storage safety report," and directing that "[a] gas corporation shall not recover any fine or penalty in any rate approved by the commission"], 522 [adding §§ 961, 963, requiring every gas corporation to "develop a plan for the safe and reliable operation of its commission-regulated gas pipeline," get it approved by the PUC, and implement it], 523 [adding § 969 directing the PUC to require an account "for the maintenance and repair of transmission pipelines," and amending § 2107 to increase the maximum penalty from $20,000 to $50,000].)
The presence of two ALJs was explained in the OSC: "Ensuring that parties understand the importance of complying with the letter and spirit of the Commission's Rules of Practice and Procedure is a duty of the Chief Administrative Law Judge. The facts of this matter appear to implicate the core principles upon which the Rules are based. For that reason, the undersigned Chief Administrative Law Judge is taking the unusual step of co-presiding with the assigned Administrative Law Judge at this important hearing."
Section 2109 provides: "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 official duties or employment, shall in every case be the act, omission, or failure of such public utility." In other words, by signing the Errata and representing PG&E at the hearing, Lead Counsel was PG&E, and everything he did and said is fully attributable to PG&E. We do not understand PG&E to argue otherwise.
"Every person who, either individually, or acting as an officer, agent, or employee of a corporation other than a public utility, violates any provision of this part, or fails to comply with any part of any order, decision, rule, direction, demand, or requirement of the commission, or who procures, aids, or abets any public utility in such violation or noncompliance, in a case in which a penalty has not otherwise been provided for such person, is guilty of a misdemeanor, and is punishable by a fine not exceeding one thousand dollars ($1,000), or by imprisonment in a county jail not exceeding one year, or by both such fine and imprisonment." (§ 2112.)
"Any public utility on whose behalf any agent or officer thereof who, having taken an oath that he will testify, declare, depose or certify truly before the commission, willfully and contrary to such oath states or submits as true any material matter which he knows to be false, or who testifies, declares, deposes, or certifies under penalty of perjury and willfully states as true any material matter which he knows to be false, is guilty of a felony and shall be punished by a fine not to exceed five hundred thousand dollars ($500,000)." (§ 2114.)
"Any public utility on whose behalf any agent or officer thereof who, having taken an oath that he will testify, declare, depose or certify truly before the commission, willfully and contrary to such oath states or submits as true any material matter which he knows to be false, or who testifies, declares, deposes, or certifies under penalty of perjury and willfully states as true any material matter which he knows to be false, is guilty of a felony and shall be punished by a fine not to exceed five hundred thousand dollars ($500,000)." (§ 2114, italics added.)
"Any public utility which does, causes to be done, or permits any act, matter, or thing prohibited or declared unlawful, or which omits to do any act, matter, or thing required to be done, either by the Constitution, any law of this State, or any order or decision of the commission, shall be liable to the persons or corporations affected thereby for all loss, damages, or injury caused thereby or resulting therefrom. If the court finds that the act or omission was wilful, it may, in addition to the actual damages, award exemplary damages...." (§ 2106, italics added.)
PG&E cites Business and Professions Code section 6068, subdivision (d) — "It is the duty of an attorney to ... [¶] ... [¶] ... never to seek to mislead the judge or any judicial officer by an artifice or false statement of fact or law" — and rule 5-200(B) of the Rules of Professional Conduct — "In presenting a matter to a tribunal, a member: [¶] ... [¶] ... Shall not seek to mislead the judge, judicial officer, or jury by an artifice or false statement of fact or law." PG&E also cites a selective survey of decisions from other states, i.e., the attorney discipline cases of In re Discipline of Eicher (2003) 2003 SD 40 [661 N.W.2d 354], In re Leonhardt (1997) 324 Or. 498 [930 P.2d 844], and In re Norton (1944) 106 Utah. 179 [146 P.2d 899], and one criminal decision (Turner v. State (Mo.Ct.App. 1998) 979 S.W.2d 222). None of it is pertinent.
Rule 1.1 derives from the former rule 1, which was adopted by the PUC in 1950. (Public Utilities Commission Rules of Practice and Procedure (1950) 49 Cal.P.U.C. 536, 541.) When renumbered Rule 1.1 in 2006, the only difference was addition of the words "or she." (Rulemaking to Update, Clarify and Recodify Rules of Practice and Procedure (July 20, 2006) Cal.P.U.C. Dec. No. D06-07-006 [2006 Cal.P.U.C. Lexis 288, appen., p. *24].) We appreciate amici curiae providing us with this information.
PG&E maintains the penalty should have halted when "PG&E actually disclosed the corrected information to Commission staff in March 2013," and thus, "at least as of that time, PG&E was neither withholding the information nor `misleading' the Commission." However, as previously noted, PG&E failed to provide staff with requested documents and information concerning the errors until the end of May 2013. Thus, at best, there was only a partial, or attempted, disclosure. More significantly, as the Commission stated in its decision denying rehearing and rejecting this very argument: "The Commission has consistently rejected utility efforts to rely on communications with staff [in] satisfying their obligation to formally inform the Commission and parties in the applicable proceeding. [Fn. omitted.] For that reason, the [initial] Decision reminded PG&E that conversations with staff do not substitute for such notification." (Italics added.) In its initial decision the PUC stated: "Rule 1.1 does not treat the Commission and its staff as synonymous." It should be obvious why the Commission would not wish to encourage parties to believe that an informal discussion, in this case a conference call with a single staff member, would substitute for the formal written amendment the Commission took such pains to identify as the proper means to inform the Commission, and the dozens of interested parties who would also be notified of the amendment.
