5VAC5-20 State Corporation Commission Rules of Practice and Procedure

REGULATIONS

Vol. 27 Iss. 26 - August 29, 2011

TITLE 5. CORPORATIONS

STATE CORPORATION COMMISSION

Chapter 20

Final Regulation

REGISTRAR'S NOTICE: The State Corporation Commission is exempt from the Administrative Process Act in accordance with § 2.2-4002 A 2 of the Code of Virginia, which exempts courts, any agency of the Supreme Court, and any agency that by the Constitution is expressly granted any of the powers of a court of record.

Title of Regulation: 5VAC5-20. State Corporation Commission Rules of Practice and Procedure (amending 5VAC5-20-260, 5VAC5-20-280).

Statutory Authority: § 12.1-13 of the Code of Virginia.

Effective Date: September 1, 2011.

Agency Contact: Joel Peck, Clerk of the Commission, State Corporation Commission, 1300 East Main Street, P.O. Box 1197, Richmond, VA 23218, telephone [phone], FAX 804371, or email [e-mail].

Summary:

The amendments modify the opportunity for parties and the commission staff to obtain discovery in regulatory and adjudicatory proceedings. Revisions provide for additional discovery of the commission staff and the commission staff's experts in regulatory proceedings and permit the expansion of discovery regarding witnesses and items of evidence in adjudicatory proceedings.

The final amendments further expand discovery from the proposed amendments, including adding provisions that permit discovery of documents and objects obtained for a case and all relevant witness statements, regardless of whether the staff intends, or does not intend, to introduce those documents as evidence or call those witnesses at hearing. Additionally, the final amendments add a definition of "witness statement" and clarify that discovery will not be required when prohibited by legal privilege.

AT RICHMOND, AUGUST 9, 2011

COMMONWEALTH OF VIRGINIA, ex rel.
STATE CORPORATION COMMISSION

CASE NO. CLK-2011-00001

Ex Parte: In the matter concerning revised
State Corporation Commission Rules of
Practice and Procedure

ORDER ADOPTING REVISIONS TO PART IV OF
THE COMMISSION'S RULES OF PRACTICE AND PROCEDURE

On January 10, 2011, the State Corporation Commission ("Commission") issued its Order for Notice of Proceeding to Consider Revisions to the Commission's Rules of Practice and Procedure ("Order for Notice of Proceeding") in this case. The Commission determined that it was appropriate to revisit Part IV of the Rules of Practice and Procedure, 5 VAC 5-20-10 et seq. ("Rules"), to consider issues related to discovery in Commission proceedings. The Commission invited interested parties to address, among other things, whether: (i) the Commission's Staff ("Staff") should be subject to additional discovery and, if so, what types of additional discovery and in what types of proceedings; and (ii) whether experts or consultants retained by Staff should be subject to discovery and, if so, what types of discovery and in what types of proceedings. The Commission also invited interested parties to address how subjecting Staff to additional discovery may affect: (i) the Commission's ability to meet statutory deadlines in certain types of proceedings; (ii) available resources and efficiency in handling cases; (iii) the Staff's ability to interact informally with regulated entities and their customers to effect resolution of disputes; (iv) the ability of Staff to work with regulated entities in competitive industries; and (v) the protection of sensitive information provided to Staff by regulated entities.

The Commission received eight comments in response to its Order for Notice of Proceeding. The Virginia Committee for Fair Utility Rates and the Old Dominion Committee for Fair Utility Rates ("Committees"), representing large industrial customers, filed comments in support of maintaining the Commission's existing Rules. The following filed comments suggesting revisions to the Rules: Columbia Gas of Virginia, Inc. ("Columbia Gas"); Washington Gas Light Company ("Washington Gas"); Verizon Virginia Inc. and Verizon South Inc. ("Verizon"); and the Virginia Telecommunications Industry Association ("VTIA"). One individual filed comments adopting the position of the VTIA. The Office of the Attorney General's Division of Consumer Counsel ("Consumer Counsel") filed a Notice of Participation and raised no concerns with the existing Rules. Shenandoah Valley Electric Cooperative filed comments in support of electronic filing and management of documents.

On April 8, 2011, the Staff filed its Response to the comments submitted herein, addressing the necessity for the suggested revisions. Staff noted that no electric, water, or sewer utilities filed comments raising concerns with the Commission's Rules, nor did any companies or individuals associated with the financial services industry.

On May 26, 2011, the Commission issued an Order for Notice and Hearing to Consider Proposed Revisions to Part IV of the Commission's Rules of Practice and Procedure ("Order for Notice and Hearing"). The Order for Notice and Hearing, among other things: (1) identified proposed revisions to Part IV of the Rules ("Proposed Rules"), which expand the discovery on Staff in adjudicatory and regulatory cases; (2) directed that public notice of the Proposed Rules be given; (3) permitted interested persons and Staff to file written or electronic comments on the Proposed Rules; and (4) scheduled a public hearing to receive oral comment from interested persons on the Proposed Rules.

The public hearing was convened on July 12, 2011, at which time oral comment was received from the following, seriatim: Verizon; Virginia Electric & Power Company ("Virginia Power"); Columbia Gas; Consumer Counsel; Committees; and Staff.

NOW THE COMMISSION, upon consideration of this matter, is of the opinion and finds that we shall adopt the rules appended hereto as Attachment A, effective as of September 1, 2011. In making our determination in this matter, the Commission has considered all of the comments and arguments submitted in this proceeding. The rules approved herein, which satisfy all legal requirements, significantly expand Staff's obligation to respond to discovery in both adjudicatory and regulatory proceedings before the Commission.¹

For example, in adjudicatory cases, Staff is required to provide the following – which will necessarily include any information that is favorable to the defendant:

All relevant statements made by the defendant;

All relevant statements made by Staff's witnesses;

All relevant statements made by witnesses that Staff does not intend to call to testify at the hearing;

All documents and objects that Staff intends to introduce at the hearing;

All documents and objects that Staff obtained for purposes of the case (regardless of whether such will be introduced at the hearing); and

A list of witnesses that Staff intends to call to testify at the hearing.²

In addition, the rules adopted herein likewise require Staff to respond to discovery in regulatory proceedings and to provide the following:

• All factual information supporting workpapers of Staff or an expert or consultant filing testimony on behalf of Staff;

• All electronic spreadsheets, including underlying formulas and assumptions, supporting workpapers of Staff or an expert or consultant filing testimony on behalf of Staff;

• All documents relied upon as a basis for recommendations or assertions in prefiled Staff testimony, Staff reports or exhibits filed by Staff, or by an expert or consultant filing testimony on behalf of Staff; and

• The identity of other formal proceedings in which an expert or consultant filing testimony on behalf of Staff testified regarding the same or a substantially similar subject matter.³

The Commission received no opposition to the Proposed Rules from any investor-owned electric utility, any electric cooperative, any natural gas utility, any water and/or sewer company, any insurance company or agent, the banking industry, the securities industry, or any consumers or representatives thereof.

Virginia Power supported the Proposed Rules, stating that the rules "are adequate and will serve the parties well."⁴ Similarly, Allegheny Power submitted a letter in support of the Proposed Rules.⁵ Columbia Gas stated that the Proposed Rules "adequately address the comments" filed by Columbia Gas in this case.⁶ Washington Gas also "does not object to the Proposed Rules, and does not, at this time, propose any revisions to the Proposed Rules."⁷

The Committees – comprised of large industrial users of electricity – argued that, even though they often take positions "fiercely adverse to those of … Staff:" (a) no party has shown that a discovery problem actually exists; (b) no additional discovery of Staff should be permitted; (c) the Proposed Rules are not necessary; and (d) additional obligations on Staff would be contrary to the public interest.⁸ The Committees, however, did not ultimately object to adoption of the Proposed Rules.⁹

Consumer Counsel supported the Proposed Rules, explaining that the rules "expand the scope of discovery, both in regulatory and adjudicatory proceedings."¹⁰

Verizon and VTIA objected to the Proposed Rules.¹¹ While these participants asserted that the Proposed Rules should be further modified, we note that the final rules adopted herein extensively and meaningfully increase the discovery on Staff. The new discovery rules, for example, require Staff to provide: (1) evidence favorable to the defendant; (2) hearing exhibits and other documents obtained for the case; (3) a list of witnesses; (4) statements obtained from witnesses and non-witnesses; (5) factual information, including electronic spreadsheets, supporting Staff's workpapers; (6) access to information from experts testifying on behalf of Staff; and (7) documents relied upon by Staff or its testifying consultant. Indeed, Verizon conceded that, even for criminal cases, (i) Commonwealth Attorneys' prosecutorial staff is not subject to the type of discovery that Verizon seeks herein, and (ii) the federal Jencks Act (regarding discovery in federal criminal cases)¹² does not go as far as the discovery rules adopted here in terms of the discovery requirements placed on federal prosecutorial staff.¹³

Accordingly, IT IS ORDERED THAT:

(1) The Commission's Rules of Practice and Procedure, as set forth in 5 VAC 5-20-10 et seq., are hereby revised and adopted as set forth on the attachment to this Order Adopting Revisions to Part IV of the Commission's Rules of Practice and Procedure, effective as of September 1, 2011.

(2) The Commission's Division of Information Resources shall forward this Order Adopting Revisions to Part IV of the Commission's Rules of Practice and Procedure and the rules adopted herein to the Registrar of Virginia for publication in the Virginia Register.

(3) This case shall be dismissed from the Commission's docket of active proceedings, and the papers filed herein shall be placed in the Commission's file for ended causes.

AN ATTESTED COPY hereof shall be sent by the Clerk of the Commission to all public utilities providing service within the Commonwealth of Virginia and to representatives of the insurance, banking, and securities industries as shown on the attached appendices and to the individuals and organizations on the service list attached hereto.

____________________________________________

¹ The rules approved herein also reflect changes to the Proposed Rules that, among other things: (i) require Staff to provide evidence that it does not intend to introduce at the hearing, including evidence favorable to the defendant; (ii) define a witness "statement" as used in these rules; and (iii) clarify that these rules do not require disclosure of information prohibited by statute or other legal privilege.

² Rule 5 VAC 5-20-280.

³ Rule 5 VAC 5-20-260.

⁴ Tr. 49.

⁵ Allegheny Power's June 8, 2011 Letter.

⁶ Tr. 50.

⁷ Washington Gas' July 5, 2011 Comments at 3-4. Washington Gas also "supports discovery of the Staff, and Staff's consultants or experts, to the same extent allowed for the applicant and other parties…." Id. at 4.

⁸ Tr. 51-64; Committees' March 18, 2011 Comments at 4.

⁹ Tr. 63.

¹⁰ Tr. 50.

¹¹ See, e.g., Verizon's July 5, 2011 Comments at 2; VTIA's July 5, 2011 Comments at 1.

¹² See 18 U.S.C. § 3500.

¹³ Tr. 41-46.

5VAC5-20-260. Interrogatories to parties or requests for production of documents and things.

The commission staff and any party in a formal proceeding before the commission, other than a proceeding under 5VAC5-20-100 A, may serve written interrogatories or requests for production of documents upon a party, to be answered by the party served, or if the party served is an entity, by an officer or agent of the entity, who shall furnish to the staff or requesting party information as is known. Interrogatories or requests for production of documents, including workpapers pursuant to 5VAC5-20-270, that cannot be timely answered before the scheduled hearing date may be served only with leave of the commission for good cause shown and upon such conditions as the commission may prescribe. Such otherwise untimely interrogatories or requests for production of documents, including workpapers pursuant to 5VAC5-20-270, may not be served until such leave is granted. No interrogatories Interrogatories or requests for production of documents may be served upon a member of the commission staff, except or an expert or consultant filing testimony on behalf of the commission staff, in a proceeding under 5VAC5-20-80 to discover: (i) factual information that supports the workpapers submitted by the staff pursuant to 5VAC5-20-270, including electronic spreadsheets that include underlying formulas and assumptions; (ii) any other documents relied upon as a basis for recommendations or assertions in prefiled testimony, staff reports or exhibits filed by staff, or by an expert or consultant filing testimony on behalf of the staff; or (iii) the identity of other formal proceedings in which an expert or consultant filing testimony on behalf of the staff testified regarding the same or a substantially similar subject matter. The disclosure of communications within the commission shall not be required and, except for good cause shown, no interrogatories or requests for production of documents may be served upon a member of the commission staff, or an expert or consultant filing testimony on behalf of the staff, prior to the filing of staff's testimony. All interrogatories and requests for production of documents shall be filed with the Clerk of the Commission. Responses to interrogatories and requests for production of documents shall not be filed with the Clerk of the Commission.

The response to each interrogatory or document request shall identify by name the person making the response. Any objection to an interrogatory or document request shall identify the interrogatory or document request to which the objection is raised, and shall state with specificity the basis and supporting legal theory for the objection. Objections shall be served with the list of responses or in such manner as the commission may designate by order. Responses and objections to interrogatories or requests for production of documents shall be served within 10 days of receipt, unless otherwise ordered by the commission. Upon motion promptly made and accompanied by a copy of the interrogatory or document request and the response or objection that is subject to the motion, the commission will rule upon the validity of the objection; the objection otherwise will be considered sustained.

Interrogatories or requests for production of documents may relate to any matter not privileged, which is relevant to the subject matter involved, 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 evidentiary value. It is not grounds for objection that the information sought will be inadmissible at the hearing if the information appears reasonably calculated to lead to the discovery of admissible evidence.

Where the response to an interrogatory or document request may only be derived or ascertained from the business records of the party questioned, from an examination, audit, or inspection of business records, or from a compilation, abstract, or summary of business records, and the burden of deriving or ascertaining the response is substantially the same for one entity as for the other, a response is sufficient if it (i) identifies by name and location all records from which the response may be derived or ascertained; and (ii) tenders to the inquiring party reasonable opportunity to examine, audit, or inspect the records subject to objection as to their proprietary or confidential nature. The inquiring party bears the expense of making copies, compilations, abstracts, or summaries.

5VAC5-20-280. Discovery applicable only to 5VAC5-20-90 proceedings.

This rule applies only to a proceeding in which a defendant is subject to a monetary penalty or injunction, or revocation, cancellation, or curtailment of a license, certificate of authority, registration, or similar authority previously issued by the commission to the defendant:

1. Discovery of material in possession of the commission staff. Upon written motion of the defendant, the commission shall permit the defendant to inspect and, at the defendant's expense, copy or photograph [ (exclusive of investigative notes) ]: (i) any relevant written or recorded statements, the existence of which is known, after reasonable inquiry, by the commission staff counsel assigned to the matter to be within the custody, possession, or control of commission staff, made by (a) the defendant, or representatives, or agents of the defendant if the defendant is other than an individual, or (b) any witness whom the commission staff intends [ , or does not intend, ] to call to testify at the hearing [ (exclusive of investigative notes) ], to a commission staff member or law enforcement officer; (ii) designated books, tangible objects, papers, documents, or copies or portions thereof, that are within the custody, possession, or control of commission staff and that commission staff intends to introduce into evidence at the hearing [ or that the commission staff obtained for the purpose of the instant proceeding ]; and (iii) the list of the witnesses that commission staff intends to call to testify at the hearing. Upon good cause shown [ to protect the identity of persons not named as a defendant ], the commission or hearing examiner may direct the commission staff to withhold disclosure of [ the identity of the persons described in clause (iii) material requested under this rule. The term "statement" as used in relation to any witness (other than a defendant) described in clause (i) of this subdivision includes a written statement made by said witness and signed or otherwise adopted or approved by him, and verbatim transcriptions or recordings of a witness' statement that are made contemporaneously with the statement by the witness ].

A motion by the defendant [ or staff ] under this rule shall be filed and served at least 10 [ 20 30 ] days before the hearing date. The motion shall include all relief sought. A subsequent motion may be made only upon a showing of cause as to why the motion would be in the interest of justice. An order or ruling granting relief under this rule shall specify the time, place, and manner of making discovery and inspection permitted, and may prescribe such terms and conditions as the commission may determine.

[ The Upon written motion of the ] commission staff [ , staff ] may also obtain the list of witnesses that the defendant intends to call to testify at the hearing, and inspect, copy, and photograph, at commission staff's expense, the evidence that the defendant intends to introduce into evidence at the hearing.

The commission staff and the defendant shall be required to produce the information described above as directed by the commission or hearing examiner, but not later than 10 days prior to the scheduled hearing; and the admission of any additional evidence not provided in accordance herewith shall not be denied solely on the basis that it was not produced timely, provided the additional evidence was produced to commission staff or the defendant as soon as practicable prior to the hearing, or prior to the introduction of such evidence at the hearing. The requirement to produce the information described in this section shall be in addition to any requirement by commission staff or the defendant to timely respond to an interrogatory or document request made pursuant to 5VAC5-20-260.

Nothing in this rule shall require the disclosure of any information, the disclosure of which is prohibited by statute [ or other legal privilege ]. The disclosure of the results of a commission staff investigation or work product of commission staff counsel shall not be required.

2. Depositions. After commencement of a proceeding to which this rule applies, the commission staff or a party may take the testimony of (i) a party, or (ii) a person not a party for good cause shown to the commission or hearing examiner, other than a member of the commission staff, by deposition on oral examination or by written questions. Depositions may be used for any purpose for which they may be used in the courts of record of the Commonwealth. Except where the commission or hearing examiner finds that an emergency exists, no deposition may be taken later than 10 days in advance of the formal hearing. The attendance of witnesses at depositions may be compelled by subpoena. Examination and cross-examination of the witness shall be as at hearing. Depositions may be taken in the City of Richmond or in the town, city, or county in which the deposed person resides, is employed, or does business. The parties and the commission staff, by agreement, may designate another place for the taking of the deposition. Reasonable notice of the intent to take a deposition must be given in writing to the commission staff counsel and to each party to the action, stating the time and place where the deposition is to be taken. A deposition may be taken before any person (the "officer") authorized to administer oaths by the laws of the jurisdiction in which the deposition is to be taken. The officer shall certify his authorization in writing, administer the oath to the deponent, record or cause to be recorded the testimony given, and note any objections raised. In lieu of participating in the oral examination, a party or the commission staff may deliver sealed written questions to the officer, who shall propound the questions to the witness. The officer may terminate the deposition if convinced that the examination is being conducted in bad faith or in an unreasonable manner. Costs of the deposition shall be borne by the party noticing the deposition, unless otherwise ordered by the commission.

3. Requests for admissions. The commission staff or a party to a proceeding may serve upon a party written requests for admission. Each matter on which an admission is requested shall be stated separately. A matter shall be deemed admitted unless within 21 days of the service of the request, or some other period the commission may designate, the party to whom the request is directed serves upon the requesting party a written answer addressing or objecting to the request. The response shall set forth in specific terms a denial of the matter set forth or an explanation as to the reasons the responding party cannot truthfully admit or deny the matter set forth. Requests for admission shall be filed with the Clerk of the Commission and simultaneously served on commission staff counsel and on all parties to the proceeding.

VA.R. Doc. No. R11-2429; Filed August 9, 2011, 11:58 a.m.