4. Is an Application Necessary for Approval of the NBC Agreement?

The filing of this Application indicates Applicants believe that approval of the NBC Agreement via the application process is necessary.

SCE states that it has reached agreement with four of the six POUs in its service territory but has not sought Commission review of those bilateral agreements because it interprets Res. E-4064 as authorizing IOUs to complete bilateral agreements with POUs without the need for further Commission approval. SCE nevertheless recommends that the Commission approve the NBC Agreement and other similar agreements that are consistent with Res. E-3999 and Res. E-4064 because, according to SCE, such agreements streamline the process for collecting NBCs from MDL customers, and reduce administrative and legal costs that would ultimately be borne by ratepayers.

DWR states that agreements such as the NBC Agreement may shift costs to other customers, including those customers of other IOUs, if assumptions concerning incremental collection costs are overstated. DWR recommends that all bilateral agreements between IOUs and POUs be reviewed by the Commission to ensure affected customers are contributing fairly to recoverable costs and that DWR collects the full amount of the DWR charges.

Discussion

Res. E-3999 and Res. E-4064 state that, as an alternative to the tariff process and procedures, a POU or a POU consumer and PG&E "may mutually agree upon a mechanism to fund, pay, or collect the CRS and other NBCs."

The authorization granted by Res. E-3999 and Res. E-4064 to enter into bilateral agreements was intended to give IOUs and POUs the flexibility to use other alternative arrangements "to fund, pay, or collect the CRS and other NBCs" in lieu of the detailed billing and collection procedures specified in Schedule NMDL and other IOU's comparable tariffs.¹² Given its concerns about cost shifting,¹³ the Commission did not give the IOUs blanket approval to re-negotiate nonbypassable charges without further Commission review and approval.

The NBC Agreement allows the Districts to pay PG&E specified amounts to fulfill the NBC obligations of the NMDL Customers served by the Districts. The agreed-upon amounts are less than the amounts established by the Commission for NBC obligations that have accrued in the past and that will accrue for ongoing charges, and relieves PG&E of its obligation to bill and collect the applicable tariffed charges.

Requesting approval of the NBC Agreement via advice letter would be appropriate if PG&E and the Districts had simply agreed to deviate from the billing and collection procedures in Schedule NMDL and not deviate from the charges in the rates section of the tariff.¹⁴ However, because the NBC Agreement raises policy questions addressed in R.02-01-011 concerning cost shifting, the filing of an application is advised in order for the Commission to determine if the agreement contravenes any Commission decisions or other law, and the extent, if any, that the agreement may shift costs to PG&E's bundled customers.¹⁵

We now describe details of the NBC Agreement and consider issues raised by the proposed agreement.

¹² For example, a POU could agree to pay the CRS and other charges listed on Schedule NMDL on behalf of its customers (or agree to bill and collect the charges from its customers), the IOU would then cease billing those customers, no longer need to follow the procedures in the tariff, and the IOU would compensate the POU for the costs the IOU avoids by not having to continue to bill and collect from those customers.

¹³ See D.03-07-028 (at 13, 19-23); D.03-08-076 (at 4-8, 11); D.04-11-014 (at 10, 12-13, 36-37; and D.04-12-059 (at 13-14).

¹⁴ The primary use of the advice letter process is to review a utility's request to change its tariffs in a manner previously authorized by statute or Commission order, to conform the tariffs to the requirements of a statute or Commission order, or to get Commission authorization to deviate from its tariffs. A utility may also request relief by means of an advice letter where the utility has been authorized or required, by statute, by General Order (GO) 96-B, or by other Commission order, to seek the requested relief by means of an advice letter; or requests modification of a Commission resolution addressing a prior advice letter of the utility. GO 96-B, General Rules,
Rule 5.1.

¹⁵ The advice letter process is not appropriate for requests that are controversial or that raise important policy questions. GO 96-B, General Rules, Rule 5.1.