JOSEPH C. SPERO, Chief Magistrate Judge.
This case concerns a power outage at the Golden Eagle Refinery (the "Refinery") owned by Plaintiff Tesoro Refining & Marketing Company LCC ("Tesoro"). Defendant Pacific Gas and Electric Company ("PG&E") moves for summary judgment on Tesoro's negligence and breach of contract claims, arguing that a tariff rule approved by the California Public Utilities Commission ("CPUC") absolves PG&E of liability because the incident was a "transmission related outage."
The Court held a hearing on October 16, 2015, and on October 20, 2015 issued an order requesting that the CPUC address the scope of the tariff rule. The CPUC has since responded and offered assistance, but advised that Tesoro would need to file an administrative complaint and the Court would need to stay the case and continue the trial date to allow time for administrative proceedings. The Court thanks the CPUC for its offer and respects its need for time to address the issue. However, as no party has requested a stay or continuance, the Court proceeds to resolve the Motion. For the reasons discussed below, the Court holds that the limitation of liability provision does not apply to the facts of this case (viewed, as they must be in the present context, in the light most favorable to Tesoro) and DENIES PG&E's Motion for Partial Summary Judgment.
The following summary recounts the facts as construed in the light most favorable to Tesoro for the purpose of resolving PG&E's present Motion. This Order should not be interpreted as resolving any disputed issues of fact.
Tesoro primarily receives electrical power for the Refinery from a cogeneration plant (the "Cogen") operated by non-parties Foster Wheeler Martinez, Inc. and Martinez Cogen Limited Partnership (collectively, "FWM"),
A meeting took place between PG&E and a predecessor to FWM (hereinafter referenced as FWM for convenience) in 1986. See Begland Decl. Ex. 17. During that meeting, PG&E and FWM discussed frequency settings for the Cogen, and PG&E assured FWM that PG&E's load shedding system would activate before the grid frequency dropped to levels dangerous to the Cogen. Id. Tesoro's expert Brian Rahman testified that the load shedding systems at the Substation "had been disabled for some time, so they were no longer functioning" at the time of the 2010 outage. Begland Decl. Ex. 7 (Rahman Dep.) 53:4-7.
Controls at the Tidewater Substation included a number of synchronization switches, or "synch switches." Based on the configuration of the transmission lines at the Substation, placing more than one of the switches in the "on" position at the same time could result in a loss of power. Accordingly,
Nie Decl. Ex. 1 (PG&E Root Cause Analysis) at PG&E0736.
In April of 2010, PG&E engineer Sebastian Fiala prepared a "Load at Risk Notification" reporting that if the Tidewater Substation became isolated or "islanded" from the grid as a whole, "[t]he majority of the time, loading at Tidewater will exceed generation at [the Cogen], and will likely cause [the Cogen] to trip offline." Begland Decl. Ex. 1. Such notifications are normally "sent to a fairly wide audience within PG&E." Begland Decl. Ex. 3 (Van Remoortere Dep.) 20:8-9. The same notification was distributed again twelve days before the planned maintenance on November 10, 2010. Begland Decl. Ex. 4. Tesoro's expert Brian Rahman later testified that "good utility practice" would require PG&E to notify FWM and Tesoro that it identified that risk. Begland Decl. Ex. 7 (Rahman Dep.) 160:1-163:2.
PG&E routinely notified FWM when maintenance or other circumstances required PG&E to disconnect either of the transmission lines running to Tidewater. Id. 67:2-14. On October 29, 2010, PG&E notified FWM that it intended to disconnect a line for maintenance on November 9, 2010, thus placing the Cogen (and other Tidewater customers) "on a single source" from the grid. Begland Decl. Ex. 4 at PG&E07647. The maintenance ultimately took place on November 10, 2010, and required temporarily disconnecting the El Sobrante line. Sias Decl. Ex. 6 at 4. After the maintenance was complete, PG&E called the FWM control room to report that both transmission lines were back in service. Begland Decl. Ex. 6 (Kromer Dep.) 78:15-24.
That afternoon, a power outage occurred. A Root Cause Analysis Report that Tesoro later submitted to Contra Costa County summarized the events of that day as follows:
Sias Decl. Ex. 6 at 4. Auditory and visual alarms activated at PG&E's Grid Control Center after the El Sobrante circuit breaker opened at 3:09 and again after the Pittsburg circuit breaker opened, but PG&E's operators at the control center failed to respond to the alarms. See Begland Decl. Ex. 16 (Cawaring Dep.) 47:21-48:11; Rahman Decl. (dkt. 89-8) ¶ 10.
No injuries were reported, but the outage "triggered a plant wide shutdown, which resulted in excess flaring and visible black plumes of smoke" from the Refinery. Sias Decl. Ex. 6 at 2-3. Contra Costa County Health Services issued a "shelter in place warning" to members of the surrounding community based on the potential effects of smoke from the Refinery's flaring process. Id. at 3.
PG&E also prepared a Root Cause Analysis, which stated that a maintenance supervisor observed that two synch switches, corresponding to circuit breakers on the Pittsburg and El Sobrante transmission lines, "were both in the `ON' position on Nov.10th, when he arrived at the substation following the outage." Nie Decl. Ex. 1 at PG&E0736. Although PG&E's analysis identified other failures and ultimately found that it was "impossible to determine what damage, if any, ... was caused by the incorrect operation of the synch switches," PG&E characterized the two switches "both being in the `ON' position [as] an abnormal switching condition," and the only short term corrective action recommended in the report was to upgrade the Tidewater synch switches to include a mechanical interlock and to ensure that no other PG&E substation lacked that feature.
Tesoro's Root Cause Analysis identified four potential root causes of the outage: (1) two synch switches at the Substation were erroneously in the "on" position at the same time; (2) a component of a programmable logic controller (PLC) at the Substation failed; (3) bushing potential devices on two PG&E circuit breakers were damaged; and (4) "[t]here was no automatic separation scheme or established operating procedure for opening of Circuit Breakers [connecting the Substation to the Cogen] due to the loss of both PG[&]E 230 KV lines to the Tidewater substation." Id. at 5. Brian Rahman, an expert witness for Tesoro, later concluded that the outage was "the result of PG&E substation design, mis-operation of synch switches, lack of adequate communication, substandard control equipment at Tidewater, and PG&E failure's [sic] to timely identify and report the loss of the transmission sources
Although FWM observed the frequency of its system drop to a problematically low level, FWM did not realize that the Cogen was supporting PG&E's Concord customers. Begland Dep. Ex. 6 (Kromer Dep.) 79:11-15, 87:10-13. Mike Kromer, a FWM plant manager at the time of the outage, testified that if PG&E had notified FWM of the circumstances, FWM could have manually disconnected the Cogen from the Tidewater Substation before the Cogen tripped offline. Id. 131:2-132:10.
California law empowers the CPUC to "supervise and regulate every public utility in the State." Cal. Pub. Util. Code § 701. Accordingly, the CPUC may "require utilities to file tariff schedules containing rates, charges and classifications, `together with all rules, contracts, privileges, and facilities which in any manner affect or relate to rates, tolls, rentals, classifications, or service.'" Waters v. Pac. Tel. Co., 12 Cal.3d 1, 6, 114 Cal.Rptr. 753, 523 P.2d 1161 (1974) (quoting Cal. Pub. Util. Code § 489)). If approved by the CPUC, such rules have the effect of law. Trammell v. W. Union Tel. Co., 57 Cal.App.3d 538, 551, 129 Cal.Rptr. 361 (1976).
PG&E's present motion concerns PG&E Electric Rule No. 14 ("Rule 14" or "Tariff Rule 14"), which is included in the record as Exhibit 1 to PG&E's Request for Judicial Notice (dkt. 79-1) and as Exhibit 2 to Tesoro's Request for Judicial Notice (dkt. 88). The present version of the relevant portion of Rule 14 became effective on January 23, 2003. Tariff Rule 14 at 1. The first three paragraphs of Rule 14, on which the parties primarily base their arguments, read as follows:
Id. (emphasis added).
Utilities routinely file "advice letters" in conjunction with proposed tariff rules. See Sullivan Decl. (dkt. 89-9) ¶¶ 3-5. Advice Letter 1737-E, which accompanied the 1998 revision to Rule 14 in which the "other transmission related outage" limitation of liability clause first appeared, includes the following description of the changes to Rule 14:
Id. Ex. 1 at ECF p. 7. The advice letter goes on to state that "[t]his filing will not increase any rate or charge, cause the withdrawal of service, or conflict with any rate schedule or rule." Id. at ECF p. 8. Advice Letter 2328-E-B, which accompanied the most recent revision to Rule 14, indicates that the only changes made were to remove references to the Power Exchange. See id. Ex. 2 at ECF pp. 2-3, 118. Neither Advice Letter 1737-E nor Advice Letter 2328-E-B specifically discusses the limitation of liability clause at issue here. See generally id. Exs. 1, 2.
The parties agreed at the October 16, 2015 hearing that no court has yet interpreted the "other transmission related outage" clause of Rule 14.
Tesoro filed this action on February 28, 2014, bringing claims for breach of contract, negligence, and inverse condemnation. See generally Compl. (dkt. 1). In accordance with a stipulated compromise after PG&E moved to dismiss Tesoro's request for punitive damages, Tesoro filed its First Amended Complaint, which includes the same claims but omits the request for punitive damages, on May 23, 2014. See generally Mot. to Dismiss (dkt. 18); Stipulation (dkts. 22, 27); 1st Am. Compl. (dkt. 28). PG&E's Answer to Tesoro's First Amended Complaint invokes "limitations of liability established in PG&E's Tariff Rule 14" as one of seventeen affirmative defenses. Answer (dkt. 35) ¶ 66.
On August 29, 2014, the Court dismissed a third-party complaint that PG&E filed against FWM for equitable indemnity, holding that PG&E failed to adequately allege that FWM was liable to Tesoro in tort (as opposed to contract), as required under California law. Order Granting Mot. to Dismiss 3d Party Compl. (dkt. 50).
PG&E filed its present Motion on August 14, 2015, and the Court held a hearing on October 16, 2015. Following the hearing, the Court requested that the CPUC file a response no later than November 19, 2015 addressing the scope of Rule 14. See Order Requesting Opinion (dkt. 115). The CPUC responded by letter dated November 13, 2015, offering assistance but explaining that that: (1) Tesoro would need to file an administrative complaint; and (2)
PG&E contends that it is entitled to summary judgment on Tesoro's breach of contract and negligence claims
Although PG&E "disputes Tesoro's claim that the Tidewater Substation caused the outage at the Refinery," it does not argue that it is entitled to summary judgment for lack of evidence of causation or negligence — instead, the present Motion is limited to PG&E's defense based on Rule 14. Id. at 3 n.1.
Much of Tesoro's Opposition is devoted to recounting the evidence that it contends demonstrates negligence by PG&E. Opp'n at 2-10. With respect to PG&E's Rule 14 argument, Tesoro responds that PG&E is bound by its statutory duty to "`exercise reasonable care in operating its system'" under California Public Utilities Code § 451, which Tesoro contends "could not be defeated by contract language," including a CPUC tariff rule. Id. at 1-2, 10-11 (quoting Langley v. Pac. Gas & Elec. Co., 41 Cal.2d 655, 661, 262 P.2d 846 (1953)).
Tesoro also seizes on the first paragraph of Rule 14, which provides that PG&E will exercise reasonable diligence and will not be liable for any outage "except that arising from its failure to exercise reasonable diligence." Id. at 11 (quoting Tariff Rule 14). Tesoro notes that the equivalent tariff rules for the other two large investor-owned electric utilities in California, Southern California Edison and San Diego Gas & Electric, have similar requirements to exercise diligence and disclaimers of liability for non-negligent outages, but do not contain any provision equivalent to the "other transmission related outage" clause of PG&E's Rule 14. Id. at 11-12 (citing Pl.'s RJN (dkt. 88) Exs. 3, 4). Tesoro suggests that the first paragraph of Rule 14 and the structure of the other utilities' rules indicate a CPUC policy of retaining utilities' liability for outages caused by their negligence, and that the third paragraph therefore does not bar liability for transmission-related outages caused by PG&E's own negligence. See id.
Next, Tesoro looks to the history of Rule 14 and PG&E's submission of the language at issue for CPUC approval. Id. at 12-16. Tesoro notes that PG&E proposed adding the third paragraph in the wake of deregulation
Finally, Tesoro contends that the structure of Rule 14 itself precludes PG&E's interpretation of the clause at issue. Id. at 17-20. In addition to the first paragraph of Rule 14 discussed above, which states that PG&E must exercise diligence and only shields PG&E from liability for outages not caused by negligence, Tesoro also looks to the "other transmission related outage" clause's context in the third paragraph. Id. Tesoro argues that the paragraph as whole evinces an intent to govern only outages outside of PG&E's control: the first sentence eliminates liability for deficiencies in supply on the ISO grid, and the second sentence, which begins with the word "similarly," lists outages caused by transmission constraints or capacity before concluding with "other transmission related outage[s]." Id. at 17-19.
PG&E contends that Tariff Rule 14 unambiguously precludes liability for outages related to transmission, and that applying principles of contract interpretation, the Court therefore need not look beyond the text of the Rule. Reply at 3-4, 6-8. PG&E argues that Tesoro's proposed construction — reading the third paragraph to encompass only transmission outages outside of PG&E's control — would render the paragraph superfluous, because the first paragraph already provides that PG&E is not liable for outages unless caused by its lack of diligence. Id. at 6-9. PG&E also
According to PG&E, the fact that the disputed provision is unique to its tariff rule is not significant, because other electrical utilities also have unique limitations of liability in their rules. Reply at 10-11. PG&E cites, for example, a clause providing that Southern California Edison shall not be liable for lost profits or other consequential damages related to the construction and operation of certain facilities, even if caused by its negligence. Id. at 11 (citing Def.'s Supp'l RJN (dkt. 103) Ex. 1 at 12).
PG&E also argues that even if the Court considers the context in which Rule 14 was proposed and adopted, "it fails to show that the Rule means something other than what it explicitly says." Id. at 12. According to PG&E, the reference in its advice letter to "`the responsibilities of end-use customers' for dealing with shortages of supply and interruptions of delivery" supports a broad reading of the limitation of liability, because it "specifically identified the effects of the revised Rule on end-use customers such as Tesoro." Id. at 12 (quoting Sullivan Decl. Ex. 1) (emphasis added by PG&E). PG&E also contends that Tesoro's reliance on the disclaimer of conflicts with other rules is misplaced because Tesoro "fails to identify any conflict between Revised Rule No. 14 and any other rate schedule or rule," and that the CPUC staff report referencing PG&E's liability for negligence is not significant evidence because it was not issued by the CPUC itself and did not focus on the electrical industry or PG&E. Id. at 12-13.
PG&E disputes Tesoro's assertion that Langley and Utilities Code section 451 preclude a limitation of liability for negligence, noting that California courts have upheld such limitations in decisions since Langley. Reply at 1, 4-5 (citing Waters, 12 Cal.3d 1). PG&E also rebuts Tesoro's characterization of certain underlying facts related to the outage, but reasserts that it "seeks summary judgment on the plain language of Rule No. 14," and that "[h]ow the transmission failure occurred and whether the transmission failure caused the Refinery to lose power is irrelevant" to the present Motion. Id. at 14-15.
The parties request that the Court take judicial notice of a number of tariff rules and similar records filed with the CPUC, as well as a previous Order issued by the Court in this action. See generally Def.'s RJN (dkt. 79); Pl.'s RJN; Def.'s Supp'l RJN. The Court takes judicial notice of all of these documents as public records not reasonably subject to dispute. See Harris v. Cty. of Orange, 682 F.3d 1126, 1132 (9th Cir.2012).
Pursuant to Civil Local Rule 7-3(d), after PG&E filed its Reply, Tesoro filed objections to certain evidence submitted therewith. See generally Objections (dkt. 107).
First, Tesoro objects to a declaration by PG&E's expert witness Richard Swanson setting forth his conclusions regarding the underlying causes of the Refinery's loss of power. See id. at 1; Sias Reply Decl. (dkt. 101) Ex. 4. Tesoro argues that because PG&E elected to limit its summary judgment motion to the issue of Tariff Rule 14, it should not be permitted to challenge the underlying facts of the outage using evidence submitted with its Reply, which Tesoro has no opportunity to substantively
Second, Tesoro challenges the declaration of Glenn Goldbeck addressing the role of the ISO, on both procedural and substantive grounds. Objections at 1-2. Procedurally, Tesoro argues that PG&E failed to designate Goldbeck as a relevant witness, and that if PG&E wished to present evidence of the ISO's functions, it should have done so with its Motion so that Tesoro would have an opportunity to respond. Id. Substantively, Tesoro contends that the declaration lacks foundation because Goldbeck is not employed by or authorized to represent the ISO. Id. at 2. Goldbeck's declaration addresses arguments first raised in Tesoro's Opposition, and it sets forth his basis for personal knowledge of ISO and PG&E roles and procedures regarding power generation and transmission. Opp'n at 18-19; Goldbeck Decl. ¶¶ 1-3. This declaration does not alter the outcome of the Motion, but the Court declines to strike it.
Summary judgment on a claim or defense is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Once the movant has made this showing, the burden then shifts to the party opposing summary judgment to designate "specific facts showing there is a genuine issue for trial." Id. "[T]he inquiry involved in a ruling on a motion for summary judgment ... implicates the substantive evidentiary standard of proof that would apply at the trial on the merits." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). On summary judgment, the court draws all reasonable factual inferences in favor of the non-movant, Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007), but where a rational trier of fact could not find for the non-moving party based on the record as a whole, there is no "genuine issue for trial" and summary judgment is appropriate. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Although tariff rules approved by the CPUC have the force of law, California courts also construe them as contracts and apply principles of contract interpretation to resolve ambiguity. E.g., Pink Dot, Inc. v. Teleport Commc'ns Grp., 89 Cal.App.4th 407, 415, 107 Cal.Rptr.2d 392 (2001); Transmix Corp. v. S. Pac. Co., 187 Cal.App.2d 257, 263, 9 Cal.Rptr. 714 (1960) ("A tariff is in the nature of a contract ...."); but see Waters, 12 Cal.3d at 10, 114 Cal.Rptr. 753, 523 P.2d 1161 ("[G]eneral principles which might govern disputes between private parties are not necessarily applicable to disputes with regulated utilities.").
Under California law, conflicting extrinsic evidence as to a contract's meaning may require resolution by a jury, and thus be inappropriate for resolution on a motion for summary judgment. See Morey, 64 Cal.App.4th at 912-13, 75 Cal.Rptr.2d 573. The Court is aware of no California cases applying that principle to interpretation of CPUC tariff rules. Because tariff rules have the effect of law and are binding on the public, and because the extrinsic evidence at issue is comparable to legislative history materials that courts routinely consider in resolving legal questions of statutory construction, the Court holds that although principles of contract interpretation can be relevant to the inquiry, interpretation of tariff rules adopted by the CPUC is a question of law appropriate for the Court to resolve on summary judgment. See Waters, 12 Cal.3d at 10, 114 Cal.Rptr. 753, 523 P.2d 1161 ("[G]eneral principles which might govern disputes between private parties are not necessarily applicable to disputes with regulated utilities.").
"The subject of limitations upon liability of ... utilities has long been considered to be a proper subject for commission regulation and supervision...." Waters, 12 Cal.3d at 6, 114 Cal.Rptr. 753, 523 P.2d 1161. "The limitation of liability provisions are an inherent part of the established rates and have the force and effect of law [and thus] are binding on the public generally...." Trammell v. W. Union Tel. Co., 57 Cal.App.3d 538, 551, 129 Cal.Rptr. 361 (1976).
In Waters, the California Supreme Court acknowledged that "ordinarily a provision which is intended to limit one's liability for negligence must clearly and explicitly express that purpose, and that it is for the courts to determine whether or not the provision possesses the requisite precision and clarity," but held that the tariff rule at issue in that case nevertheless
The disputed language of Rule 14, read in context, is ambiguous. It is not clear from the face of the Rule what constitutes an "other transmission related outage." Tariff Rule 14 at 1. PG&E asserts that the provision encompasses any outage related to systems operating at voltage levels designated as "Transmission Voltages" in a separate tariff rule, PG&E Electric Rule No. 2. See Mot. at 5 n.2; Pl.'s RJN Ex. 2. But there is no reference to that definition or Rule in the relevant portion of Rule 14, i.e., Sheet 1, addressing "End Use Customer and Their Agents." See Tariff Rule 14 at 1. Moreover, the first paragraph of Rule 14 establishes that PG&E has a duty of reasonable diligence, and immunizes PG&E from liability for service interruptions that are not caused by PG&E's failure to fulfill that duty. Rule 14 does not explicitly indicate whether the third paragraph — barring liability for inadequate bids and supply on the ISO grid, transmission capacity and constraints, and "other transmission related outage[s]" — is intended as an exception or clarification of the first paragraph's general rule that PG&E must "exercise reasonable diligence" and is only absolved of liability if not caused by its failure to do so. See id.
Looking, as the Court must, to context beyond the face of the Rule — see Morey, 64 Cal.App.4th at 912, 75 Cal.Rptr.2d 573 — the Court finds further reasons to conclude that it is ambiguous. PG&E proposed adding the language at issue in the immediate wake of structural changes to electricity transmission in California,
The Court agrees with PG&E that, read in isolation, Tariff Rule 14 is amenable to the reading PG&E proposes. As discussed above, it is not clear from the face of the rule whether the third paragraph is an exception or clarification of the general policy that PG&E is liable for damage arising from its negligence. Further, Electric Rule No. 2 could provide some support for defining an "other transmission related outage" in the context of Rule 14 as any outage related to equipment operating at transmission-level voltages. Based on the context as a whole, however, the Court concludes that the CPUC did not intend to shield PG&E from the sort of negligence that allegedly occurred here.
The more specific limitations of liability set forth in the third paragraph of the Rule all relate to functions that were at least partially divested from PG&E by the direct access deregulation. The first sentence of that paragraph bars liability for "deficiencies in supply stemming from inadequate power bids or power deliveries over the [ISO] grid." Tariff Rule 14 at 1. "Market participants, including PG&E, submit bids into the [ISO] wholesale energy markets" and deliver power to the grid. See Goldbeck Decl. ¶ 6. The deregulation plan caused PG&E to be one of many such market participants, and reduced the degree of control PG&E exercised over power supplied within its own service area. See generally Cal. Pub. Util. Code § 330; CPUC Decision 95-12-063, 64 CPUC 2d 1 (1995) (outlining the direct access program). Accordingly, the overall supply of energy to the ISO grid depends on the bids and output of many participants, and this new language of Rule 14 made clear that PG&E would not be liable if bids or deliveries fell short of demand. Contrary to PG&E's suggestion in its Reply, Goldbeck's declaration does not indicate that this sentence was intended to shield PG&E from liability for its own negligence.
The second sentence of the third paragraph begins with the word "similarly," which means that the restrictions to follow are related to the restrictions just recited, i.e., limitations of liability for decisions and contingencies that PG&E could no longer exclusively control. The first two examples of the second sentence support this conclusion: "interruption due to transmission constraint" and "allocation of transmission or intertie capacity" are no longer within PG&E's exclusive control. See Tariff Rule 14 at 1. Under the deregulation program that prompted PG&E's Rule 14 proposal, "[t]he [ISO] is responsible for operation and management of the California transmission
The second sentence concludes with the provision at issue, that PG&E is also not liable for "other transmission related outage, planned or unplanned." Tariff Rule 14 at 1. The broad reading that PG&E proposes — barring liability for any outage above a certain voltage, even if caused by PG&E's own equipment or operator error — is incongruent in comparison to the more specific limitations of liability discussed above, all of which relate to functions transferred to or shared with other entities as part of the deregulation and "direct access" program.
Moreover, the advice letter that PG&E submitted to the CPUC with the proposed tariff rule includes no reference to the broad liability waiver PG&E seeks here. To the contrary, the letter characterized the revised Rule as making "changes required for direct access." See Sullivan Decl. Ex. 1. PG&E offers no explanation whatsoever for how a broad limitation of liability for its own negligence in its own operations, and specifically operations that it had engaged in long before deregulation, would be a "change[] required for direct access." See id. Instead, PG&E relies on the vague statement in the advice letter that the revision "addresses the responsibilities of end-use customers, Energy Service Providers (ESPs), scheduling coordinators, the Power Exchange (PX) and Independent System Operator (ISO) for dealing with shortages of supply and interruptions of delivery." See id.; Reply at 12. Contrary to PG&E's characterization, that statement decidedly does not "specifically identif[y] the effects of the revised Rule on end-use customers such as Tesoro." See Reply at 12.
PG&E's other arguments for construing the "other transmission related outage" clause to bar liability for its own negligence are not persuasive. Although a narrower reading is arguably redundant to the first paragraph of the Rule (which bars liability except for PG&E's failure to exercise diligence), the "`preference for avoiding surplusage constructions is not absolute.'" King v. Burwell, ___ U.S. ___, 135 S.Ct. 2480, 2483, 192 L.Ed.2d 483 (2015) (quoting Lamie v. U.S. Trustee, 540 U.S. 526, 536, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004)). A "rigorous application of that canon does not seem particularly useful" where there are reasonable explanations for surplus language. Id. Much as the Supreme Court held that some degree of superfluous drafting was to be expected in the context of the Affordable Care Act, see id., it is reasonable to think that a utility like PG&E would seek a belt-and-suspenders approach to limiting liability for events outside its control in the context of an industry overhaul that introduced new opportunities for such events to arise, even if PG&E may well have been protected under the existing tariff rule. Moreover, either interpretation arguably renders some language redundant: while Tesoro's reading is in some ways redundant to the first paragraph, PG&E's reading would make superfluous the specific examples of transmission constraints and allocation.
The cases that PG&E cites finding limitations of negligence liability under CPUC tariff rules are not analogous to the case at hand. As discussed above, the California Supreme Court's decision in Waters rested on the CPUC's "undisputed" approval of "a general policy of limiting the liability of telephone utilities for ordinary negligence
PG&E offers no evidence or authority that the CPUC, any court, or even PG&E itself has ever construed Rule 14 as the broad limitation of negligence liability that it now asserts. There is no indication that PG&E intended to avoid such liability when it submitted Rule 14, or that the CPUC intended to grant such broad immunity when it approved the Rule. Based on the record available — which indicates that the revisions were "changes required for direct access" and were submitted in response to a CPUC decision that addressed deregulation and did not address negligent operation of transmission lines by PG&E — the revisions to the Rule appear to have been intended to ensure that PG&E would not be exposed to new liability as a result of deregulation. See Sullivan Decl. Ex. 1; CPUC D.97-10-087, 76 CPUC 2d 287. And while it is conceivable, as PG&E suggests, that the CPUC might conclude "that exposing PG&E to the potentially large damages that could arise from transmission outages could lead to higher rates," see Reply at 9, there is no indication that the CPUC reached such a conclusion here, nor any explanation why such a change would be "required for direct access," see Sullivan Decl. Ex. 1. The record indicates that PG&E provided standby power to Tesoro under substantially the same arrangement well before the advent of direct access; there is no apparent reason why that program would require changes to PG&E's potential liability under its standby power agreement.
Based on the specific examples in the third paragraph, the purpose of the revisions to Rule 14 as stated in the 1998 Advice Letter, and the nature of the regulatory changes prompting those revisions, the third paragraph appears to have been intended to ensure at the very least that PG&E would not be held liable for consequences outside of its control, and perhaps to avoid complex inquiries to determine an exact cause where circumstances contributing to an outage lie at the intersection of the roles and responsibilities of PG&E, other market participants, and new entities like the ISO. There is no indication that the CPUC intended to preclude all liability for every outage at a transmission-grade voltage.
The parties' briefs do not address the application of Rule 14 if Tesoro fails to prove negligence by PG&E. Tesoro does not appear to dispute that the first paragraph of the Rule absolves PG&E of liability for outages that are not caused by PG&E's negligence. The contract on which Tesoro bases its claim explicitly provides that it is subject to PG&E's "applicable electric rates and rules as regularly established from time to time and on file the with California Public Utilities Commission." FAC Ex. A ¶ 1. Accordingly, Tesoro cannot recover on its breach of contract claim unless it shows that the Refinery outage "ar[ose] from [PG&E's] failure to exercise reasonable diligence." Tariff Rule 14 at 1.
For the reasons stated above, the Court holds that Tariff Rule 14 was not intended to and does not absolve PG&E of liability for its own negligent operation or maintenance of electricity transmission systems, and accordingly DENIES PG&E's Motion for Partial Summary Judgment.
