ORDER NO. 98-163

ENTERED APR 20 1998

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UE 102

DISPOSITION: MOTION FOR ADDITIONAL PROTECTION GRANTED

On January 9, 1998, the Administrative Law Judge issued a Standard Protective Order in this case at the request of Portland General Electric (PGE). On February 12, 1998, PGE filed a Motion for additional protection. PGE asserts that certain material it has been requested to provide to PUC Staff pursuant to a discovery request is so sensitive that it should not be disclosed to any other party. It asks that the Commission issue a new Protective Order limiting disclosure of this material to Staff alone. Objections were filed by Travers & Nau and Joint Customers. PGE filed a response to the objections.

The Material

PGE’s application includes a proposal to sell its supply asset portfolio in an auction. In its prefiled testimony, PGE set out estimates of the market value of the portfolio.

PUC Staff propounded the following discovery request on PGE (Data Request No. 76):

Please provide all workpapers supporting PGE’s estimates of its generating plants and power sales and power purchase contract market values listed on page 1 of the transition costs workpapers. These workpapers should show, in adequate detail, how each market value was derived. Please provide supporting MONET model input and output workpapers showing the derivation of market prices for the length of time used to calculate the market values on page 1 of the transition cost workpapers.

PGE states in its Motion that the requested workpapers include "detailed assumptions concerning future capital expenditures and overhead and management costs related to the supply portfolio. They include assumptions concerning PGE’s fuel contracts and risks associated with those contracts. Those assumptions reveal strategic decisions that PGE has made with respect to the assets."

PGE foresees harm to its interests and the public interest if the material is disseminated to other parties to the proceeding. First, PGE points out that "many of the intervenors in this case are counter-parties to PGE’s wholesale contracts or have adverse interests in PGE’s assets." The disclosure of the information involved in this discovery dispute would reveal PGE’s assumptions and strategy and could compromise PGE’s negotiating position in dealing with those counter-parties. PGE notes that it remains the owner of the assets until they are sold and may need to negotiate with the counter-parties with respect to the assets. Moreover, if the Commission does not approve the application, the counter-parties may use the information in future negotiations to the detriment of PGE and its customers. If, on the other hand, the Commission approves the sale of the supply portfolio, its value will be "maximized by protecting PGE’s strategic thinking and proprietary information with respect to its assets."

Second, PGE claims that the auction process that will be used to dispose of its supply portfolio if the application is granted will be distorted if the material in question is disclosed to the parties to this case (some of whom may become bidders) but not to other potential bidders who are not parties. PGE argues that the issues intervenor Travers and Nau has raised relating to the participation of affiliates of PGE in the auction process (see discussion below) will be dealt with in rules for the auction PGE will file with the Commission. The filing will establish the rules and procedures governing the auction and will protect potential bidders and the counter-parties.

PGE also argues that the material sought is not needed by the parties. It points out that its estimates of the market value of the supply portfolio (which is the subject of the data request in question) do not purport to establish the actual market value, which will be determined by the proposed auction, but are merely a "placeholder to calculate illustrative rates." Thus the parties have little or no need to view the assumptions behind the estimates.

Objection to the Proposed Protective Order

Two parties objected to the Motion: Travers & Nau and "Joint Customers," a group comprising The Industrial Customers of Northwest Utilities (ICNU), the Citizens Utility Board (CUB), and The Commercial Energy Alliance (CEA).

Travers & Nau

Travers & Nau argues that the best prices for PGE’s supply portfolio will be obtained if potential bidders are fully and equally informed, particularly in "areas such as future capital expenditures and overhead and management costs." It suggests that affiliates of PGE who may become bidders may already have had access to the sensitive strategic thinking that the Motion seeks to keep secret. It also questions PGE’s claim that it could be placed at a competitive disadvantage by disclosure of the information, given that PGE plans on "exiting the supply function." Travers & Nau ask that the Commission determine whether and to what extent PGE affiliates have had access to the information involved before ruling on the Motion. If the Commission grants the Motion, it should take steps to insure that all bidders are on an equal footing.

Joint Customers

Joint Customers points out that PGE is proposing to recover from its customers the shortfall, if any, between the book value of the supply assets and the actual sale price. PGE is thus asking its customers to bear 100 percent of the financial risk that the auction of the supply portfolio will not yield the "maximum possible price." Joint Customers sees PGE as "acting essentially as a fiduciary for its customers" under this proposal. Customers thus have a significant interest in the sale of the assets. To have a "meaningful role" in the proceeding and auction, customers must not have their access to all relevant information curtailed. PGE’s Motion would, according to Joint Customers, bar customers’ representatives from reviewing important information concerning the value of the assets to be sold and would exclude them from "being closely involved" in the details of the auction process.

Joint Customers distinguishes between customers of PGE and those who are PGE’s competitors or who may bid in the auction. It notes that a federal case relied upon by PGE, Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1741 (9th Cir.), cert. Denied, 506 US 869 (1992) involved the exclusion of an in-house lawyer of a competitor from access to sensitive information. The parties represented by Joint Customers are customers of PGE, not competitors. Moreover, the representatives of the members of Joint Customers are either outside attorneys and consultants or, in the case of CUB, an in-house attorney for a customers’ advocacy group.

Joint Customers cites a Washington Utilities and Transportation Commission (WUTC) order which limited access to highly "competitive-sensitive"("Top Secret") information so that it would not be disclosed to competitors of the utilities involved. The Commission limited access to the information to the Commission Staff, Public Counsel, and specific customers, including Northwest Industrial Gas Users, Industrial Customers of Northwest Utilities, and Seattle Steam Company. Puget Sound Power & Light/Washington Natural Gas Company, Sixth Supplemental Order Modifying Protective Order, Docket Nos.UE-951270 and UE-96-0195, August 1996.

Disposition

Oregon Rule of Civil Procedure (ORCP) 36 governs our discovery practice in most instances. Some pertinent parts are as follows:

B. Scope of discovery. Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows:

B (1) In general. For all forms of discovery, parties may inquire regarding any matter, not privileged, which is relevant to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things, and the identity and location of persons having knowledge of any discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.

Subsection C of ORCP 36 describes protective orders:

C. Court order limiting extent of disclosure. Upon motion by a party or by the person from whom discovery is sought, and for good cause shown, the court in which the action is pending may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following: (1) that the discovery not be had; (2) that the discovery may be had only on specified terms and conditions, including a designation of the time or place; (3) that the discovery may be had only by a method of discovery other than that selected by the party seeking discovery; (4) that certain matters not be inquired into, or that the scope of the discovery be limited to certain matters; (5) that discovery be conducted with no one present except person designated by the court; (6) that a deposition after being sealed be opened only by order of the court; (7) that a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way; (8) that the parties simultaneously file specified documents or information enclosed in sealed envelopes to be opened as directed by the court; or (9) that to prevent hardship the party requesting discovery pay to the other party reasonable expenses incurred in attending the deposition or otherwise responding to the request for discovery.

PGE’s request for a modified protective order which bars disclosure of certain specified information to any party other than staff is granted. Although the Commission has rarely issued protection beyond that granted in our Standard Protective Order, the provisions of ORCP 36C cited above provide for greater protection if circumstances warrant. In this case, the circumstances make an exception to the standard protective order appropriate. In drawing this conclusion, we balance the potential harm from disclosure of the material against any benefit which might accrue from that disclosure. We emphasize that our ruling is based on the pleadings filed by the parties and is subject to reconsideration if circumstances change.

We note first that PGE’s concern about irreparable and long-lasting economic harm from disclosure of the information is persuasive. The information may reveal assumptions and strategic decisions relating to PGE’s supply assets, including both contracts and generation assets. Some of the parties to the case have contracts with PGE relating to those assets and may continue in that relationship with the company in the future. It is reasonable for PGE to fear that access by these parties to the information involved could distort future negotiations to the detriment of PGE and its ratepayers.

Second, we conclude that the two objecting parties have failed to show how the information involved is pertinent to the case. While ORCP 36B does not require material sought through discovery to be admissible evidence, the material must be relevant to some issue in the case.

The subject of this case is the restructuring application filed by PGE. The restructuring includes sale by auction of the company’s supply portfolio. The amount realized in the sale will, under PGE’s proposal, determine the company’s transition costs. PGE provided estimates of the market value of the portfolio. The material in dispute relates to the bases for those estimates. However, according to PGE’s application and pleadings, those estimates, and the bases for them, will not affect the Commission’s decision. The sale will be carried out by auction, not by negotiation between PGE and prospective buyers. Under PGE’s proposal, the Commission’s decision will be made only after the proposed auction has occurred and binding bids are in hand. If so, the estimates will not be relevant to the Commission’s decision.

Joint Customers correctly asserts that the price obtained for the supply assets will impact customers of PGE. However, for the reasons discussed above, that fact does not make the particular information relating to the estimates discoverable. Joint Customers has not shown any other basis which persuades the Commission that access to this information could lead to evidence admissible in this proceeding.

Travers & Nau’s argument against the additional protection is based on its claim that the material involved could affect its auction strategy. It has not established that its auction strategy bears on any issue before the Commission in its consideration of the application. Travers & Nau’s claim that affiliates of PGE might have had access to the information or may yet be given access is not a basis for denying PGE’s request. As PGE points out, it will file a proposal for rules governing the auction process. These rules will deal with the issue of affiliates. If it becomes clear that the auction process has been distorted because of the possible participation of affiliates, the Commission can then take steps to correct the problem.

It should be noted that this ruling is intended to be narrow. As noted above, it is based on PGE’s application and its pleadings on this Motion. Moreover, it applies only to the specific information in the specific format set out in the data request submitted by Staff to PGE. It is based on the significant potential harm of disclosure and the failure of Travers and Nau and Joint Customers to demonstrate a connection between the information sought and the issues before the Commission. It is clear that, on the record before us, the harm far outweighs the benefit. If, however, the procedural course of this case changes so that the information involved becomes relevant to our decision in this case, we will grant access to all pertinent information.

ORDER

IT IS ORDERED that the request for a modification of the standard protective order filed by PGE is granted.

Made, entered, and effective ____________________________.

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of service of this order. The request must comply with the requirements of OAR 860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070. A party may appeal this order to a court pursuant to ORS 756.580.