5. Description of Proposed Agreement

The NBC Agreement provides that the Districts will each pay PG&E mutually agreed upon amounts which PG&E may apply to NBCs of the NMDL Customers served by the Districts. The NBC Agreement relieves PG&E of any obligations to bill or collect the applicable NBCs from existing NMDL Customers or new NMDL Customers who receive electric service from the Districts. Upon payment by the Districts of the amounts described in the NBC Agreement, PG&E will release NMDL Customers who receive electric distribution service from the Districts from liability for the NBCs otherwise due or that may accrue pursuant to current Commission decisions and PG&E Schedule E-NMDL.

The NBC Agreement also identifies the NMDL charges applicable to new and existing NMDL Customers served by the Districts, and, as discussed in greater detail below, (1) qualifies the NMDL Customers served by the Districts as of November 13, 2007 for the "stand-alone" exemption set forth in PG&E Schedule E-NMDL, Special Condition 2.e; (2) terminates PG&E's billing and collection obligations to new and existing NMDL Customers served by the Districts; (3) provides for credits to the Districts for PG&E's avoided costs related to the billing and collection of NBCs; (4) exempts new and existing NMDL Customers served by the Districts from additional generation-related or distribution-related NBCs; and (5) provides for PG&E to refund the NMDL Customers served by the Districts prior NMDL payments.

The Districts agree to pay PG&E the amounts shown in Appendix A to the NBC Agreement that have accrued or will accrue for retroactive and ongoing NBCs charged to existing NMDL Customers served by the Districts, subject to a 45% reduction to reflect PG&E's current collection experiences and the efficiencies associated with the Districts paying these amounts. The Districts will also pay PG&E the amounts shown in Appendix A to the NBC Agreement that have accrued or will accrue for ongoing NBCs charged to new NMDL Customers served by the Districts, subject to a 40% reduction to reflect PG&E's expected future collection experience and the efficiencies associated with the Districts paying these amounts.

In recognition of its avoided billing and collection costs, PG&E agrees to reduce the amounts to be paid by the Districts in accordance with PG&E's Schedule E-Credit.¹⁶ In particular, PG&E will compensate the Districts based on the estimated number of NMDL Customers served by the Districts as of February 1, 2009, as shown in Appendix A to the NBC Agreement. These amounts will be credited on a timeframe that is consistent with the Districts' decisions regarding payments.¹⁷

The NBC Agreement qualifies the NMDL Customers served by the Districts as of November 13, 2007 for the "stand-alone" exemption in PG&E Schedule E-NMDL, Special Condition 2(e).¹⁸

The NBC Agreement provides that, if PG&E is authorized or directed to bill and collect, any new NBCs related to generation or distribution facilities or assets, such charges will not apply to the NMDL Customers served by the Districts.

The NBC Agreement contains additional provisions relating to jointly supporting approval of the NBC Agreement, dispute resolution procedures, termination of the NBC Agreement, and provisions addressing confidentiality and disclosure, consents, releases, waivers and notices.

Following is a summary of comments on the Application and discussion of the issues raised by the NBC Agreement.

¹⁶ Schedule E-Credit provides for credits to customers that receive consolidated or dual billing services from energy service providers.

¹⁷ The NBC Agreement permits the Districts to elect to pay certain of their obligations on a lump-sum or three-year amortized basis, some on a lump-sum or monthly basis, and others on a per-customer basis.

¹⁸ Special Condition 2.e provides that NMDL taking service from a POU without the use of transmission and distribution facilities owned by PG&E is exempt from ongoing CTC.