3. Background on the Application

The Application requests approval of the NBC Agreement, which provides that the Districts will pay PG&E agreed upon amounts that PG&E may apply to NBCs and relieves PG&E of responsibility for billing and collecting NBCs from NMDL Customers served by the Districts.

The Application states that PG&E began issuing bills to NMDL Customers in or around June 2008, including those NMDL Customers who receive electric distribution service from the Districts. Subsequently, many NMDL Customers served by the Districts refused to pay PG&E bills for NBCs, and some voiced their dissatisfaction with the bills for NBCs to the Commission and Legislature. According to Applicants, at the recommendation of several members of the Legislature, Applicants and certain NMDL Customers entered into negotiations in September 2008 to resolve issues surrounding billing and collection of NBCs from NMDL Customers served by the Districts. Applicants state that the NBC Agreement is a result of those negotiations.

Special Condition 5 of Schedule E-NMDL permits bilateral agreements with POUs or POU customers to be used as an alternative arrangement to PG&E's NMDL tariff.¹⁰ The Application is the first request to the Commission for approval of a bilateral agreement that was entered into pursuant to Special Condition 5 of Schedule E-NMDL and Res. E-4064.

Neither Res. E-3999 nor Res. E-4064 specify whether bilateral agreements require Commission approval, or, if so, whether the advice letter, application, or another process should be followed to request any Commission approval that may be required.¹¹ Therefore, before addressing the substantive issues related to the Application, we first consider whether the NBC Agreement requires Commission approval via the application process or the advice letter process, or whether no further approval beyond the authorization in Res. E-3999 and
Res. E-4064 is necessary.

¹⁰ The Districts are POUs pursuant to Pub. Util. Code § 224.3 and Water Code § 2050, et seq.

¹¹ Res. E-3999 permits bilateral agreements as an alternative arrangement to the Transferred MDL tariff while Res. E-4064 permits bilateral agreements as an alternative arrangement to the New MDL tariff.