217 Cal. App. 4th 784
Cal. Ct. App.2013Background
- SFPP, L.P. operates intrastate and interstate pipelines; upstream owners include Kinder Morgan entities and SFPP's 0.5% owner is Santa Fe Pacific Pipelines.
- PUC regulates SFPP’s intrastate rates and SFPP petitions for writ of review of SFPP I (2011) and SFPP II (2012) rate decisions.
- SFPP contends it was denied an income tax allowance due to its partnership form; argues the decisions are law-manipulative and due process concerns arise.
- PUC uses a stand-alone tax approach, treating SFPP as a tax-exempt entity for rate purposes, with taxes borne by partners, not SFPP itself.
- Historical ARCO decisions (1998, rehearing 1999) laid groundwork for tax-allowance policy; PUC later clarified it does not apply a blanket partnership tax allowance.
- Petition denied; costs awarded to respondent and real parties in interest on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PUC correctly denied income tax allowance for SFPP as a partnership | SFPP contends partnership status mandates tax allowance. | PUC rejects stand-alone tax allowance for partnerships; taxes borne by partners | Denied; PUC did not err; policy-based decision permissible |
| Whether PUC’s ROE determination was an abuse of discretion | SFPP argues ROE was unjustifiably high and based on flawed methods | PUC used case-by-case assessment with reasonable proxy and models | Denied; no abuse; ROE within reasonable bounds |
| Whether due process rights were violated by evidentiary standards | SFPP claims reliance on a FERC-based evidentiary standard was improper | PUC did not rely on an improper standard; policy choice systemic not evidentiary trap | Denied; due process not violated |
| Whether stand-alone tax doctrine requires a partnership tax allowance | SFPP asserts stand-alone doctrine compels tax allowance | PUC recognizes stand-alone treatment but rejects partnership tax as basis for allowance | Denied; stand-alone doctrine does not require allowance |
| Whether PUC consideration of authorities and proxy groups was faulty | SFPP claims improper proxy/unsupported references | PUC used reasonable proxy and exercised discretion; did not abuse | Denied; no reversible error |
Key Cases Cited
- Bluefield Water Works & Improvement Co. v. Public Serv. Comm'n., 262 U.S. 679 (U.S. 1923) (return on capital must provide a reasonable return comparable to similar risks)
- City and County of San Francisco v. Public Utilities Com., 6 Cal.3d 119 (Cal. 1971) (standards for ratemaking and statutory interpretation)
- Pacific Bell Wireless, LLC v. Public Utilities Com., 140 Cal.App.4th 718 (Cal. App. 4th 2006) (preserves agency deference in statutory interpretation)
- Southern California Edison Co. v. Peevey, 31 Cal.4th 781 (Cal. 2003) (PUC ratemaking principles; reasonableness standard)
- Eden Hospital Dist. v. Belshé, 65 Cal.App.4th 908 (Cal. App. 1998) (evidentiary and statutory review standards in admin decisions)
- The Ponderosa Telephone Co. v. Public Utilities Com., 197 Cal.App.4th 48 (Cal. App. 2011) (three-step cost-of-capital framework for rate of return)
- City of Los Angeles v. Public Utilities Com., 15 Cal.3d 680 (Cal. 1975) (agency discretion and reasonable implementation of policy)
- SFPP, L.P. v. Public Utilities Comm., None (Cal. App. 2013) (not included due to lack of official reporter citation)