So. Cal. Gas Co. v. P.U.C. ( 2023 )

Filed 1/6/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
SOUTHERN CALIFORNIA GAS B310811
COMPANY,
Commission
Decision No.
Petitioner,
D.21-03-001 &
Resolution ALJ-391
v.
PUBLIC UTILITIES COMMISSION,
Respondent.
ORIGINAL PROCEEDING; review of Decision No.
D.21-03-001 and Resolution ALJ-391 of the Public Utilities
Commission of the State of California. Petition for writ of
mandate granted.
Gibson, Dunn & Crutcher, Julian W. Poon, Michael H.
Dore, Andrew T. Brown, Daniel M. Rubin and Matthew N. Ball
for Petitioner.
John A. Pacheco for San Diego Gas & Electric Company as
Amicus Curiae on behalf of Petitioner.
Arocles Aguilar, Mary McKenzie, Christine Hammond,
Dale Holzschuh, Carrie G. Pratt and Edward Moldavsky for
Respondent.
Earthjustice, Matthew Vespa, Rebecca Barker and Sara
Gersen for Sierra Club as Amicus Curiae on behalf of
Respondent.
Jerry Flanagan and Scott L. Nelson for Public Citizen and
Consumer Watchdog as Amici Curiae on behalf of Respondent.
___________________________________
These original proceedings involve efforts by the Public
Utilities Commission (PUC or the Commission) to discover
whether the political activities of Southern California Gas
Company (SCG) are funded by SCG’s shareholders, which is
permissible, or ratepayers, which is not. The Commission
propounded several discovery requests (called “Data Requests”)
on SCG, and when SCG failed fully to comply, moved to compel
further responses that ultimately resulted in an order to comply
or face substantial penalties. SCG seeks a writ of mandate
directing the Commission to rescind its order on the ground that
the discovery requests infringe on SCG’s First Amendment
rights.
We grant the petition. SCG has shown that disclosure of
the requested information will impact its First Amendment
rights, and the Commission failed to show that its interest in
determining whether SCG’s political efforts are impermissibly
funded outweighs that impact.
BACKGROUND
The California Constitution authorizes the Legislature to
exercise control over companies delivering heat or power to the
public, and authorizes the PUC to “establish rules, examine
records, issue subpoenas, . . . take testimony, punish for
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contempt, and prescribe a uniform system of accounts for all
public utilities subject to its jurisdiction.” (Cal. Const., art. XII,
§ 6.)
In 1996, the Legislature created a division within the
Commission, later naming it the Public Advocate’s Office (PAO,
the Office, or CalAdvocates), “to represent and advocate on behalf
of the interests of public utility customers and subscribers within
the jurisdiction of the commission.” (Stats. 2018, ch. 51, § 39.)
The PAO’s goal is “to obtain the lowest possible rate for service
consistent with reliable and safe service levels.” (Pub. Util. Code,
§ 309.5, subd. (a).) 1
To serve this goal, the PAO is authorized to “compel the
production or disclosure of any information it deems necessary to
perform its duties from any entity regulated by the commission.”
(§ 309.5, subd. (e).) Any objection to a PAO request for
production is adjudicated by the PUC. (Ibid.)
SCG, an investor-owned utility that provides natural gas to
the public in several Southern California counties, is subject to
Commission regulation and PAO discovery inquiries.
As an investor-owned utility, SCG differentiates between
“ratepayer funds” (“above-the-line accounts”) and “shareholder
funds” (“below-the-line accounts”). Activities or contracts are
preliminarily booked to an above-the-line or below-the-line
account, with the final ratemaking decision settled at a “general
rate case” proceeding (GRC). At a GRC, SCG generally seeks cost
recovery from ratepayers only for expenditures in its above-the-
line accounts. Expenditures in SCG’s below-the-line accounts
1
Undesignated statutory references will be to the Public
Utilities Code.
3
(i.e., shareholder-funded accounts) are not recovered from
ratepayers. In this manner, SCG may use its 100 percent-
shareholder-funded accounts to, among other things, advocate for
natural gas, renewable gas, and other clean-fuel (e.g., hydrogen)
solutions.
A. PAO Discovery Inquiry
1. Rulemaking 19-01-011 proceeding
On January 31, 2019, the PUC initiated an unrelated
proceeding, designated “Rulemaking 19-01-011,” regarding
building decarbonization. In that proceeding, an association
known as Californians for Balanced Energy Solutions (C4BES),
which presents itself as “a coalition of natural and renewable
2
natural gas users,” moved to obtain party status. The Sierra
Club opposed the motion, alleging that C4BES was actually an
3
“astroturfing” group founded and funded by SCG.
2. Discovery requests before the ALJ
As a result of the Sierra Club’s allegation in Rulemaking
19-01-011 that C4BES was an astroturfing group funded by SCG,
the PAO undertook to investigate the allegation, and in May
2019, initiated a discovery inquiry into the extent to which SCG
used ratepayer funds to support putative grassroots
organizations advocating for SCG’s anti-decarbonization
2
Available at:
https://www.publicadvocates.cpuc.ca.gov/general.aspx?id=4444.
3
Astroturfing is a practice in which corporate sponsors of a
message mask their identity by establishing separate
organizations to state a position or make it appear as though the
movement originates from and has grassroots support.
4
positions. The discovery inquiry, conducted outside any formal
proceeding, comprised three data requests and one subpoena.
a. July 2019 Data Request
On July 19, 2019, the PAO issued a data request to SCG,
Request No. “CalAdvocates-SC-SCG-2019-04,” concerning the
4
financing of SCG’s activities.
SCG responded by producing a Work Order Authorization,
which in turn contained a Balanced Energy Internal Order which
accounted for shareholder contributions to fund the work order.
The point of SCG’s production was to show that it did not use
shareholder contributions to fund astroturf groups.
However, SCG redacted from its response shareholder
dollar figures from the Balanced Energy Internal Order, and
objected to their production as nonresponsive to the PAO’s
request and unnecessary to the discharge of its duties. The PAO
moved the Commission’s administrative law judge (ALJ) to
compel further responses containing an unredacted Work Order
Authorization, which the ALJ granted.
b. August 2019 Data Request
On August 13, 2019, the PAO served SCG with a request
for all contracts covered by the Work Order Authorization,
Request No. “CalAdvocates-SC-SCG-2019-05.” In response, SCG
produced contracts funded jointly by ratepayers and
shareholders, but objected to producing C4BES-related contracts
funded solely by shareholders on the ground that to produce them
4
To reiterate, the PAO issued this data request outside of
the R.19-01-011 proceeding, as the scope of that proceeding was
limited to building decarbonization matters.
5
would violate its rights of free speech and association. The PAO
moved the ALJ to compel further responses.
(1) ALJ November 1, 2019 Ruling
On November 1, 2019, the ALJ granted the PAO’s motion
to compel further responses to the August 13 request, ordered
SCG to produce requested documents within two business days,
and denied SCG’s request for a two-week stay to afford it an
5
opportunity to appeal the ruling.
(2) SCG November 1, 2019 Motion to Stay
On November 1, 2019, SCG moved to reconsider and stay
enforcement these rulings.
c. May 2020 Data Requests and Subpoena
(1) May 1 Request
On May 1, 2020, as part of its continuing inquiry into
SCG’s use of ratepayer monies to fund an anti-decarbonization
campaign through astroturf organizations, the PAO served
Request No. “CalAdvocates-TB-SCG-2020-03” on SCG, seeking
remote access to SCG’s System Applications & Products
accounting system. This accounting system is a large database
that includes sensitive financial and nonfinancial material
related to SCG’s transactions, including vendor invoices, third-
party payments, workers-compensation payments, employee
reimbursements, and other attachments relating to
approximately 2,000 vendors and other parties. The PAO’s
5
The ALJ assigned by the Commission to handle the
matter notified the parties of certain procedural rules to follow
since this discovery dispute was outside of any formal proceeding
in which the Commission’s Rules of Practice and Procedure (Title
20, Division 1, of the California Code of Regulations) (herein
“Rules”) would directly apply.
6
request included a request for “information regarding all
contracts, invoices, and payments made to third parties,” and a
request to train and assist a PAO auditor to access SCG’s
accounts.
(2) Subpoena
On May 5, 2020, the PAO served a subpoena on SCG,
commanding the utility to provide PAO “staff and consultants”
with the same information as set forth in Request No.
CalAdvocates-TB-SCG-2020-03, including “access to all databases
associated in any manner with the company’s accounting
systems,” and “both on-site and remote access . . . at the times
and locations requested by [PAO],” “no later than three business
days after service,” i.e., by May 8. The focus was on determining,
for example, what accounts were used to track shareholder-
funded activity, what payments are made from those accounts,
and what invoices were submitted in support of those payments.
The subpoena was supported with a PAO declaration that SCG’s
“responses to data requests in the investigation have been
incomplete and untimely.”
(3) May 8 Request
On May 8, 2020, the PAO demanded the production of data
contained in SCG’s accounting system for all “100% shareholder
funded” accounts that “house[] costs for activities related to
influencing public opinion on decarbonization policies,” and “for
lobbying activities related to decarbonization policies” (the May 8
data request).
SCG responded by proposing that “access to attachments
and invoices [in the accounting system] would be shut off [by
default] but could be requested by [PAO’s] auditor,” at which time
“[a]n attorney would then be able to quickly review requested
7
invoices and provide nonprivileged . . . materials to the auditor.”
The PAO rejected SCG’s proposal.
SCG also offered to provide access to approximately 96
percent of the information related to its accounts—shielding only
constitutionally protected and/or privileged material—provided
that the PAO agreed to a non-disclosure agreement or
confidentiality protocol. The PAO rejected this offer as well.
On May 18, 2020, SCG produced fixed copies of two years’
worth of its accounting data (2016-2017) for accounts specifically
identified by the PAO.
B. Proceedings before the Full Commission
1. December 2, 2019 and May 22, 2020 SCG Motion
for Reconsideration/Appeal and Motion to File
Declarations Under Seal
On December 2, 2019, SCG appealed from and moved the
full Commission to reconsider the ALJ’s November 1, 2019 ruling.
On May 22, 2020, SCG supplemented this motion with (1) a
separate motion, and (2) a motion to file certain declarations
under seal.
SCG observed that the PAO’s discovery inquiry is not itself
a formal proceeding, and requested that the inquiry be brought
within a formal proceeding by issuance of a Commission Order
Instituting Rulemaking or Order Instituting Investigation, which
SCG argued would provide more transparency and ensure due
process. The PAO opposed this request.
In its motion for reconsideration, SCG argued that the
Commission’s interest in obtaining information about SCG’s
political activities and activities that are “100% shareholder-
8
funded” was not compelling because such activities are not
subject to Cal Advocates’ oversight.
SCG further argued that disclosure of information about
political activities and activities that were “100% shareholder
funded” would infringe on SCG’s First Amendment rights.
In support of the motion, Sharon Tomkins, SCG’s Vice
President of Strategy and Engagement and Chief Environmental
Officer, declared, “If the non-public contracts and
communications [SCG] has had regarding its political activity to
advance natural gas are required to be disclosed in response to
the demands of the [PAO], it will alter how [SCG] and its
partners, consultants, and others work together and
communicate in the future regarding matters of shared political
interest.” Tompkins declared that SCG’s production to date had
already “had a chilling effect on [SCG] and [its] ability to engage
in activities which are lawful.”
Tompkins declared that her work includes “sensitive
discussions in furtherance of developing strategy and advocacy
associated with natural gas solutions and selecting [SCG’s]
message and the best means to promote that message. It also
has included recommending that others become involved with
[SCG] in this political process.” She declared that further
disclosures to the PAO “will have a chilling effect” on those
communications and “could limit [SCG’s] future associations”
because she and SCG “will need to take into consideration the
9
potential disclosure of such communication in the future as a
result of such forced [discovery] disclosure.”
Tompkins declared that “Based on conversations [she] had,
others may be less likely to associate with [SCG]” if information
about its political efforts were disclosed to the Commission.
In further support of its motion for reconsideration, SCG
submitted three declarations from private organizations
specializing in government relations and public affairs, including
statements that disclosure of shareholder information to the
Commission would dissuade them from communicating or
contracting with SCG.
2. May 22, 2020 SCG Motion to Quash or Stay the
May 5 Subpoena
Also on May 22, 2020, SCG moved to quash or stay portions
of the PAO’s May 5, 2020 subpoena to allow SCG an opportunity
to implement software solutions to exclude what it deemed to be
materials protected by attorney-client and attorney work product
privileges, as well as materials implicating First Amendment
issues.
3. June 23, 2020 PAO Motion for Contempt and
Monetary Sanctions
On June 23, 2020, the PAO moved the Commission to find
SCG in contempt.
4. July 9, 2020 PAO Motion to Compel and
Request for Assessment of Fines
On July 9, 2020, the PAO moved to compel SCG to produce
certain unredacted declarations it had produced to the
10
Commission in December 2019 but not to the PAO, and to assess
SCG $100,000 per day in fines retroactive to June 30, 2020.
C. Commission Ruling: PUC Resolution ALJ-391
1. Original Ruling
On December 21, 2020, the Commission issued PUC
Resolution ALJ-391, which it later modified, post, to become the
operative ruling.
In it, the Commission rejected SCG’s assertion that its
First Amendment rights to association would be chilled by Data
Request No. CalAdvocates-SC-SCG-2019-05. Although SCG’s
declarations attempted to link the disclosure of such documents
with a chilling effect on certain communications and contracts
with outside entities, such contentions were “primarily
hypothetical,” and fell short of the threatened harm and
“palpable fear of harassment and retaliation in recognized
instances of First Amendment infringement, such as that in”
NAACP v. Alabama, infra. The Commission found “no
infringement on SCG’s First Amendment rights by disclosing to
the Commission, including Cal Advocates, responses to Data
Request No. CalAdvocates-SC-SCG-2019-05 seeking documents
about its decarbonization campaign.”
Even if SCG had established that responding to the data
request would chill communications, the Commission found that
the government’s compelling interest in disclosure outweighed
the chilling effect. The Commission flatly rejected SCG’s
argument that it had no authority to inspect the records of
investor-owned utilities concerning political activities. On the
contrary, a compelling government interest existed where the
PAO’s requests for information about SCG’s decarbonization
11
campaign were consistent with its statutory authority to regulate
investor-owned utilities.
Resolution ALJ-391 ordered SCG to comply with the PAO’s
discovery requests, but deferred the matter of sanctions to a later
date.
SCG moved for a rehearing on Resolution ALJ-391, and
moved to stay enforcement. On December 30, 2020, SCG sought
an extension of time to comply with the resolution, which the
Commission granted.
On December 30 and 31, 2020, the PAO moved to expedite
the Commission’s ruling on Resolution ALJ-391, sought an
extension of time to respond to SCG’s motion for rehearing, and
propounded four more data requests on SCG.
2. Modified Ruling
On March 2, 2021, the Commission issued an order
modifying Resolution ALJ-391 and denying SCG’s request for a
rehearing and its motion for a stay.
The Commission found that a “utility may [not] unilaterally
designate certain topics off-limits to Commission oversight,” and
PAO discovery is the “least restrictive means of obtaining the
desired information.” The Commission rejected SCG’s argument
that the PAO’s discovery rights were limited by SCG’s First
Amendment right to association, as well as its argument that
conducting the discovery inquiry outside the confines of a formal
proceeding violated SCG’s procedural due process rights.
The Commission ordered SCG to produce the information
and documents responsive to Request No. CalAdvocates-SC-SCG-
2019-05, including confidential declarations submitted under seal
to the Commission but not the PAO, and to comply with the May
5, 2020 subpoena within 30 days of the effective date of the
12
Resolution. Although the Commission ordered SCG to provide
access to unredacted versions of its confidential declarations
under existing protections, it permitted the utility to file
confidential versions of certain declarations under seal. The
Commission deferred consideration of the PAO’s motions for
contempt, sanctions and fines.
D. Summary
In sum, this dispute started when, in a formal Commission
proceeding, R.19-01-011, the Sierra Club exposed a potential
financial relationship between SCG and C4BES. Based on the
record of that proceeding, there was no transparency as to
whether the Sierra Club’s allegation was correct or, if it was,
whether C4BES was funded by SCG’s ratepayers as opposed to
shareholders. The PAO submitted a series of discreet data
requests to SCG outside of any proceeding, which led to the
request in question, Data Request No. CalAdvocates-SC-SCG-
2019-05, designed to discover whether SCG used ratepayer funds
to finance astroturf groups. SCG partially complied with the
request but has always maintained that its shareholder
information (not its ratepayer information) is privileged by
constitutional rights to free speech and freedom of association.
The ALJ and full Commission both disagreed with SCG’s
position.
We granted SCG’s petition for a writ of review of the
Commission’s resolution of the dispute. The Commission filed a
response supporting its decision, and SCG filed a reply
challenging it. We also granted the requests of several entities to
file amicus briefs.
13
DISCUSSION
SCG contends (1) the Commission exceeded its
constitutional and statutory authority by requiring SCG to
comply with the PAO’s discovery requests pertaining to
shareholder accounts; (2) the requests infringe on SCG’s First
Amendment right of association insofar as they pertain to
shareholder accounts; and (3) conducting this dispute as a
discovery matter rather than a formal proceeding violates
procedural due process.
A. PAO Authority
The Commission is authorized to supervise and regulate
utility monopolies. “PUC’s authority derives not only from
statute but from the California Constitution, which creates the
agency and expressly gives it the power to fix rates for public
utilities. (Cal. Const., art. XII, §§ 1, 6.) Statutorily, PUC is
authorized to supervise and regulate public utilities and to ‘do all
things . . . which are necessary and convenient in the exercise of
such power and jurisdiction’ (§ 701) . . . . Adverting to these
provisions, we have described PUC as ‘ “a state agency of
constitutional origin with far-reaching duties, functions and
powers” ’ whose ‘ “power to fix rates [and] establish rules” ’ has
been ‘ “liberally construed.” ’ ” (Southern California Edison Co. v.
Peevey (2003) 31 Cal.4th 781, 792.)
The Commission may hold hearings and establish
procedures to carry out its mandate. (See Consumers Lobby
Against Monopolies v. Public Utilities Com. (1979) 25 Cal.3d 891,
905; see also Cal. Const., art. XII, §§ 1-6.)
“The commission, each commissioner, and each officer and
person employed by the commission may, at any time, inspect the
accounts, books, papers, and documents of any public utility. The
14
commission, each commissioner, and any officer of the
commission or any employee authorized to administer oaths may
examine under oath any officer, agent, or employee of a public
utility in relation to its business and affairs. Any person, other
than a commissioner or an officer of the commission, demanding
to make any inspection shall produce, under the hand and seal of
the commission, authorization to make the inspection. A written
record of the testimony or statement so given under oath shall be
made and filed with the commission.” (§ 314, subd. (a).)
These powers apply “to inspections of the accounts, books,
papers, and documents of any business that is a subsidiary or
affiliate of, or a corporation that holds a controlling interest in,
an electrical, gas, or telephone corporation . . . with respect to any
transaction between the . . . corporation and the subsidiary,
affiliate, or holding corporation on any matter that might
adversely affect the interests of the ratepayers . . . .” (§ 314, subd.
(b).) (Italics added.)
“Every public utility shall furnish to the commission in
such form and detail as the commission prescribes all
tabulations, computations, and all other information required by
it to carry into effect any of the provisions of this part, and shall
make specific answers to all questions submitted by the
commission. [¶] Every public utility receiving from the
commission any blanks with directions to fill them shall answer
fully and correctly each question propounded therein, and if it is
unable to answer any question, it shall give a good and sufficient
reason for such failure.” (§ 581.)
“Whenever required by the commission, every public utility
shall deliver to the commission copies of any or all maps, profiles,
contracts, agreements, franchises, reports, books, accounts,
15
papers, and records in its possession or in any way relating to its
property or affecting its business, and also a complete inventory
of all its property in such form as the commission may direct.”
(§ 582.)
“Every public utility shall furnish such reports to the
commission at such time and in such form as the commission
may require in which the utility shall specifically answer all
questions propounded by the commission. The commission may
require any public utility to file monthly reports of earnings and
expenses, and to file periodical or special reports, or both,
concerning any matter about which the commission is authorized
by any law to inquire or to keep itself informed, or which it is
required to enforce. All reports shall be under oath when
required by the commission.” (§ 584.)
Commission employees are authorized to “enter upon any
premises occupied by any public utility, for the purpose of making
the examinations and tests and exercising any of the other
powers provided for in this part,” and to “set up and use on such
premises any apparatus and appliances necessary therefor.”
(§ 771.)
As noted, in 1996 the Legislature created the PAO, a
division within the Commission, “to represent and advocate on
behalf of the interests of public utility customers and subscribers
within the jurisdiction of the commission.” (Stats. 2018, ch. 51,
§ 39.)
The PAO is authorized to “compel the production or
disclosure of any information it deems necessary to perform its
duties from any entity regulated by the commission, provided
that any objections to any request for information shall be
decided in writing by the assigned commissioner or by the
16
president of the commission, if there is no assigned
commissioner.” (§ 309.5, subd. (e).) Any objection to a PAO
request for production is adjudicated by the PUC. (Ibid.)
“No information furnished to the commission by a public
utility . . . , except those matters specifically required to be open
to public inspection . . . , shall be open to public inspection or
made public, except on order of the commission . . . or a
commissioner in the course of a hearing or proceeding.” (§ 583,
subd. (a).)
SCG, as a public utility, is subject to the Commission’s
jurisdiction. (§§ 216, 218.)
B. Standard of Review
“[A]ny aggrieved party may petition for a writ of review
in the court of appeal.” (§ 1756, subd. (a); see also Pacific Bell
v. Public Utilities Com’n (2000) 79 Cal.App.4th 269, 278.)
“There is a strong presumption of validity of the
commission’s decisions.” (Greyhound Lines, Inc. v. Public
Utilities Commission (1968) 68 Cal.2d 406, 410 (Greyhound).)
Review of a Commission decision “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. [¶] (5) The order or
decision was procured by fraud or was an abuse of discretion.
[¶] (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)(1)-(6).)
17
We give great weight to the Commission’s interpretation of
the Public Utilities Code, as that agency is constitutionally
authorized to administer its provisions (Southern California
Edison v. Peevey, supra, 31 Cal.4th at p. 796), and will disturb
its interpretation only if “it fails to bear a reasonable relation to
statutory purposes and language” (Greyhound, supra, 68 Cal.2d
at pp. 410-411). We do not conduct a trial de novo, nor weigh nor
exercise independent judgment on the evidence. (§ 1757, subd.
(b); see Eden Hosp. Dist. v. Belshe (1998) 65 Cal.App.4th 908,
915.) The Commission’s findings of fact “ ‘are not open to attack
for insufficiency if they are supported by any reasonable
construction of the evidence. [Citation.] . . . “When conflicting
evidence is presented from which conflicting inferences can be
drawn, the PUC’s findings are final.” ’ ” (Clean Energy Fuels
Corp. v. Public Utilities Com. (2014) 227 Cal.App.4th 641, 649;
see also Toward Utility Rate Normalization v. Public Utilities
Com. (1978) 22 Cal.3d 529, 537-538.)
“Notwithstanding Section[] 1757 . . . , in any proceeding
wherein the validity of any order or decision is challenged on the
ground that it violates any right of petitioner under the United
States Constitution or the California Constitution, the Supreme
Court or court of appeal shall exercise independent judgment on
the law and the facts, and the findings or conclusions of the
commission material to the determination of the constitutional
question shall not be final.” (§ 1760.) “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
18
require or justify disregard of the weight which may properly
attach to findings upon hearing and evidence.” ’ [Citation.] In
other words, judicial reweighing of evidence and testimony is
ordinarily not permitted.” (Pacific Gas & Electric Co. v. Public
Utilities Com. (2015) 237 Cal.App.4th 812, 838.)
C. Application
Pursuant to the Commission’s broad constitutional and
statutory authority, SCG is required to respond to the PAO’s data
requests of its SAP accounting system unless to do so would
violate SCG’s constitutional rights.
SCG argues the PAO’s data requests infringe on its First
Amendment rights with no substantial relation between the
requests and a sufficiently important governmental interest. We
agree.
1. SCG’s Due Process Rights
SCG contends that the PAO’s discovery “non-proceedings”
constitute a “largely rules-free no-man’s-land” of “unbounded
discovery and investigatory authority.” It argues that
conducting this dispute as a discovery matter outside the
confines of a formal proceeding, where the Commissions Rules
of Practice and Procedure and filing requirements do not
directly apply, violates procedural due process. We disagree.
A regulatory agency enjoys flexibility in fashioning the
procedures necessary to exercise its responsibilities.
Nevertheless, the PAO’s use of ad hoc procedures must be
consistent with due process. (San Pablo Bay Pipeline Co., LLC
v. Public Utilities Com. (2015) 243 Cal.App.4th 295, 313; Cal.
Const. art. XII, § 2 [Commission procedures are “[s]ubject to
statute and due process”].)
19
Procedural due process requires that a party be given
notice and an opportunity to be heard when a government action
threatens deprivation of liberty or property. (Board of Regents of
State Colleges v. Roth (1972) 408 U.S. 564, 569-571.)
Here, the dispute started when, in a formal Commission
proceeding, R.19-01-011, a potential financial relationship
between SCG and C4BES came to light in a pleading filed by the
Sierra Club. Based on the record of that proceeding, the PAO
submitted a series of discreet Data Requests to SCG outside of
any proceeding, which led to the Data Request in question, Data
Request No. CalAdvocates-SC-SCG-2019-05, designed to discover
whether SCG used ratepayer funds to finance astroturf groups.
SCG only partially complied with the request, maintaining that
its shareholder information (not its ratepayer information) was
privileged by constitutional rights to free speech and freedom of
association.
The PAO then invoked section 309.5, which allows it to
compel “production or disclosure of any information it deems
necessary to perform its duties from any entity regulated by the
commission” and to bring any resulting discovery disputes to the
President of the Commission.
The President of the Commission referred the matter to the
Chief Administrative Law Judge to provide for a procedural path
to address the dispute. The Chief Administrative Law Judge
assigned an ALJ to preside over the dispute, and provided the
parties with certain procedural rules to follow.
At each step of this process, the PAO defended discrete
discovery requests focused on the information needed to perform
its statutory duties. SCG had an opportunity to challenge the
PAO’s motions, submit motions itself, and move for the full
20
Commission to act on its requests. SCG neither requested
evidentiary hearings nor contested relying on written pleadings
to resolve the issues set forth herein.
Under these circumstances, we conclude SCG has been
afforded ample due process.
2. SCG’s First Amendment Rights
“The First Amendment prohibits government from
‘abridging the freedom of speech, or of the press; or the right of
the people peaceably to assemble, and to petition the Government
for a redress of grievances.’ This [includes] . . . ‘a corresponding
right to associate with others.’ [Citation.] Protected association
furthers ‘a wide variety of political, social, economic, educational,
religious, and cultural ends,’ and ‘is especially important in
preserving political and cultural diversity and in shielding
dissident expression from suppression by the majority.’
[Citation.] Government infringement of this freedom ‘can take a
number of forms.’ ” (Americans for Prosperity Foundation v.
Bonta (2021) ___U.S.___ [141 S.Ct. 2373, 2382, 210 L.Ed.2d 716,
726-727] (Americans for Prosperity).) For example, freedom of
association may be violated “where individuals are punished for
their political affiliation,” “or where members of an organization
are denied benefits based on the organization’s message.” (Ibid.)
“[C]ompelled disclosure of affiliation with groups engaged
in advocacy may constitute as effective a restraint on freedom of
association as [other] forms of governmental action.” (National
Ass’n for Advancement of Colored People v. State of Ala. ex rel.
Patterson (1958) 357 U.S. 449, 462 [78 S.Ct. 1163, 2 L.Ed.2d
1488] (NAACP v. Alabama).) “NAACP v. Alabama involved this
chilling effect in its starkest form. The NAACP opened an
Alabama office that supported racial integration in higher
21
education and public transportation. [Citation.] In response,
NAACP members were threatened with economic reprisals and
violence. [Citation.] As part of an effort to oust the organization
from the State, the Alabama Attorney General sought the group’s
membership lists. [Citation.] We held that the First Amendment
prohibited such compelled disclosure.” (Americans for Prosperity,
supra, 210 L.Ed.2d at pp. 726-727.) The Supreme Court
explained that “[e]ffective advocacy of both public and private
points of view, particularly controversial ones, is undeniably
enhanced by group association,” and noted there was a “vital
relationship between freedom to associate and privacy in one’s
associations.” (NAACP v. Alabama, at pp. 460, 462.) “Because
NAACP members faced a risk of reprisals if their affiliation with
the organization became known—and because Alabama had
demonstrated no offsetting interest ‘sufficient to justify the
deterrent effect’ of disclosure, [citation]—we concluded that the
State’s demand violated the First Amendment.” (Americans for
Prosperity, at p. 727.)
When compelled disclosure is challenged on First
Amendment grounds, we apply a standard of “exacting scrutiny”
to the government’s action. (Americans for Prosperity, supra, 210
L.Ed.2d at p. 727.) “Under that standard, there must be ‘a
substantial relation between the disclosure requirement and a
sufficiently important governmental interest.’ [Citation.] ‘To
withstand this scrutiny, the strength of the governmental
interest must reflect the seriousness of the actual burden on First
Amendment rights.’ [Citation.] Such scrutiny . . . is appropriate
given the ‘deterrent effect on the exercise of First Amendment
22
rights’ that arises as an ‘inevitable result of the government’s
conduct in requiring disclosure.’ ” (Ibid.)
“A party who objects to a discovery request as an
infringement of the party’s First Amendment rights is in essence
asserting a First Amendment privilege.” (Perry v.
Schwarzenegger (9th Cir. 2010) 591 F.3d 1147, 1160.) “[A] claim
of First Amendment privilege is subject to a two-part framework.
The party asserting the privilege ‘must demonstrate . . . a “prima
facie showing of arguable first amendment infringement.” ’
[Citation.] ‘This prima facie showing requires appellants to
demonstrate that enforcement of the [discovery requests] will
result in (1) harassment, membership withdrawal, or
discouragement of new members, or (2) other consequences which
objectively suggest an impact on, or “chilling” of, the members’
associational rights.’ [Citation.] [¶] ‘If appellants can make the
necessary prima facie showing, the evidentiary burden will then
shift to the government . . . [to] demonstrate that the information
sought through the [discovery] is rationally related to a
compelling governmental interest . . . [and] the “least restrictive
means” of obtaining the desired information.’ ” (Id. at pp. 1160-
1161, fn. omitted.) “To implement this standard, we ‘balance the
burdens imposed on individuals and associations against the
significance of the . . . interest in disclosure,’ [citation], to
determine whether the ‘interest in disclosure . . . outweighs the
harm.’ ” (Id. at p. 1161.) This balancing may consider, for
example, the seriousness of the threat to the exercise of First
Amendment rights against the substantiality of the state’s
interest. (Ibid.) “The argument in favor of upholding the claim of
privilege will ordinarily grow stronger as the danger to rights of
23
expression and association increases.” (Black Panther Party v.
Smith (D.C. Cir. 1981) 661 F.2d 1243, 1267.)
A prima facie showing requires more than bare allegations
of possible First Amendment violations. “ ‘[T]he record must
contain “objective and articulable facts, which go beyond broad
allegations or subjective fears.” ’ ” (Dole v. Local Union 375,
Plumbers Intern. Union of America, AFL-CIO (9th Cir. 1990) 921
F.2d 969, 973 (Dole); see also Brock v. Local 375 (9th Cir. 1988)
860 F.2d 346, 350, fn. 1.)
Here, SCG argued before the Commission, and reasserts in
these writ proceedings, that Data Request No. CalAdvocates-SC-
SCG-2019-05 seeks information about shareholder funding of
SCG’s decarbonization campaign, which constitutes political
activity. SCG argues that insofar as the PAO seeks this
information, its data request chills its First Amendment rights.
In support of its argument, Sharon Tomkins, SCG’s Vice
President of Strategy and Engagement and Chief Environmental
Officer, declared that if SCG’s non-public contracts and
communications were disclosed to the Commission there would
be a “chilling effect on [SCG] and [its] ability to engage in
activities which are lawful,” which “could limit [SCG’s] future
associations” because she and SCG would “need to take into
consideration the potential disclosure of [sensitive
communications] in the future as a result of such forced
[discovery] disclosure.” Tompkins declared that “Based on
conversations [she] had, others may be less likely to associate
with [SCG]” if information about its political efforts were
disclosed to the Commission. Three declarants from private
organizations specializing in government relations and public
affairs stated that disclosure of shareholder information to the
24
Commission would dissuade them from communicating or
contracting with SCG.
Tomkins’s concern that disclosure of political information to
the Commission will cause her to “take into consideration”
whether sensitive communications will be revealed constitutes
nothing more than a circular argument about a subjective fear.
Tompkins said nothing about how the requested disclosure “is
itself inherently damaging to the organization or will incite other
consequences that objectively could dissuade persons from
affiliating with the organization.” (Dole, supra, 921 F.2d at p.
974.) In NAACP v. Alabama, for example, the NAACP proved
that disclosure of its membership roles would subject its
members to economic reprisals and threats of physical coercion.
(NAACP v. Alabama, supra, 357 U.S. at p. 462.)
However, Tompkins voiced a concern about membership
discouragement or withdrawal, supported by three declarations
from representatives of entities who stated they would be less
likely to associate with SCG if information about their political
efforts were disclosed to the Commission. These declarations
presented objective and articulable facts, beyond broad
allegations or subjective fears, suggesting that enforcement of the
data requests insofar as they pertained to shareholder
expenditures would incite “consequences that objectively could
dissuade persons from affiliating with the organization.” (Dole,
supra, 921 F.2d at pp. 973, 974.) It is not SCG’s subjective fear
that disclosure of shareholder expenditure information would
dissuade third parties from communicating or contracting with
SCG: Several third parties told them it would.
The Commission argues that pursuant to section 583,
which prohibits public disclosure of information obtained by the
25
PAO in discovery, shareholder information disclosed to the PAO
would remain confidential. The point is irrelevant because SCG’s
evidence demonstrates that disclosure to the PAO itself would
chill third parties from associating with the utility.
Because SCG demonstrated that a threat to its
constitutional rights exists, the burden shifted to the Commission
to demonstrate that the data requests serve and are narrowly
tailored to a compelling governmental interest.
3. Governmental interests
A governmental entity seeking discovery must show that
the information sought is highly relevant to the claims or
defenses in the proceeding at hand. (Perry v. Schwarzenegger,
supra, 591 F.3d at pp. 1160-1161.) “The request must also be
carefully tailored to avoid unnecessary interference with
protected activities, and the information must be otherwise
unavailable.” (Id. at p. 1161.)
A regulated utility may not use ratepayer funds for
advocacy-related activities that are political or do not otherwise
benefit ratepayers. (Southern California Edison Co. (2012)
Cal.P.U.C. (Nov. No. 12-11-051) [Lexis 555, *765] [finding that
membership subscriptions to organizations that advance tax
reduction policies are inherently political, and funding should
not be permitted under rate recovery]; Southern California Gas
Co. (1993) Cal.P.U.C. (Dec. No. 93-12-043) [Lexis 728, *103]
[finding that “ratepayers should not have to bear the costs of
public relations efforts in this area, which according to [SCG],
are designed primarily to increase load by promoting natural
gas use to business and government leaders”].)
The PAO’s statutory mandate is to “obtain the lowest
possible rate for service,” primarily for residential and small
26
commercial customers. (§ 309.5, subd. (a).) In service of this
mandate, the PAO may compel regulated entities to produce or
disclose information “necessary to perform its duties”—i.e.,
information relating to “rate[s] for service.” (Id. at subds. (a),
(e); see § 314.)
As an investor-owned utility, SCG differentiates between
shareholder funds and ratepayer funds, and claims to use only
shareholder funds for lobbying activities. Although regulation
of the utility requires understanding whether SCG provides
accurate information regarding the allocation of its advocacy
costs between ratepayer and shareholder accounts, this may be
learned simply by examining ratepayer expenditures. If
ratepayers do not pay for advocacy-related activities, the PAO’s
mandate is satisfied.
However, the PAO’s discovery inquiries into all sources of
funding for SCG’s lobbying activities go beyond ratepayer
expenditures. Insofar as the requests seek information about
shareholder expenditures, they exceed the PAO’s mandate to
obtain the lowest possible costs for ratepayers and its authority
to compel disclosure of information necessary for that task.
The requests therefore are not carefully tailored to avoid
unnecessary interference with SCG’s protected activities.
The Commission argues that the PAO’s discovery rights
are “essentially coextensive” with the Commission’s own rights.
We disagree. The PAO is authorized to compel only that
discovery which is “necessary to perform its duties.” (§ 309.5,
subd. (e).) The PAO’s and Commission’s discovery rights would
be coextensive only if their duties were the same, which of
course they are not. (See § 309.5, subd. (a) [explaining the
PAO’s mandate].)
27
The Commission argues the PAO is authorized to ensure
that “advocacy costs have been booked to the appropriate utility
accounts.” With respect, we disagree. The PAO is authorized to
ensure only that advocacy costs are not booked to ratepayer
accounts. This it may do by examining ratepayer, not
shareholder, accounts. SCG has repeatedly offered access to
ratepayer accounts.
The Commission argues that sometimes SCG
misclassifies expenditures, and has at times moved
expenditures from ratepayer to shareholder accounts. But this
just shows that a less invasive discovery process is working, and
the PAO can confirm that no funds have been misclassified to
ratepayer accounts by reviewing above-the-line accounts.
4. Contempt and Sanctions
In its briefing and at oral argument petitioner raised the
issue of looming sanctions based on actual or potential contempt
findings, although no sanctions are currently
accreting. Because we will vacate Resolution ALJ-391 insofar
as it compels disclosure of shareholder expenditures, no basis
for sanctions exists.
DISPOSITION
The petition for writ of mandate is granted. Commission
Resolution ALJ-391 is vacated with respect to shareholder data
sought by the Commission for which petitioner asserts its First
Amendment right of association. Resolution ALJ-391 is affirmed
in all other respects.
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CERTIFIED FOR PUBLICATION
CHANEY, J.
We concur:
ROTHSCHILD, P. J.
BENDIX, J.
29