6.1. May PG&E Reduce the NBCs Payable by NMDL Customers Served by the Districts and Release those NMDL Customers from Liability for NBCs, and Relieve PG&E of its Obligations to Bill and/or Collect NBCs?

Applicants assert that agreements that reduce the amount of NBCs that are payable are permissible under § 366.2(d), § 366.2(g)(2), and § 367, and that the Commission is not prohibited from approving the NBC Agreement or otherwise taking actions that might result in some cost shifting. Applicants acknowledge that reductions to the amounts of NBCs charged to NMDL Customers may result in some modest cost-shifting. According to Applicants, however, the Commission has discretion to approve exceptions to NBCs when justified by the facts or public policy. Applicants point to D.03-04-030 as an example of the Commission finding it reasonable and consistent with legislative and Commission policy to exempt customer generation under 1.0 megawatts in size from all CRS cost components.

Applicants state that the Commission has the legal authority, pursuant to current Commission decisions and PG&E Schedule E-NMDL, to approve an agreement that releases NMDL Customers from NBCs otherwise due. In particular, Applicants state that Special Condition 3a of PG&E Electric Schedule E-NMDL expressly provides that PG&E may be relieved of its obligations to bill and collect NBCs from NMDL customers by entering into a bilateral agreement with a POU or POU customer.

Applicants assert that approval of the NBC Agreement is justified because the NBC Agreement reduces or eliminates the uncertainty and potential that PG&E may collect little or nothing from NMDL customers, and because the administrative and legal cost savings associated with the NBC Agreement will likely exceed the reductions in NBCs provided under the NBC Agreement. Applicants contend that the NBC Agreement is in their customers' and the public interest because it reasonably resolves issues surrounding NBCs that PG&E is billing the NMDL Customers served by the Districts.

DWR states that the DWR Rate Agreement adopted in D.02-02-051 (Rate Agreement)¹⁹ and the Servicing Order adopted in D.07-03-025 (Servicing Order) do not prohibit the Commission from reducing the amounts that have accrued or will accrue for prior and ongoing NBCs charged to the NMDL Customers served by the Districts, as long as the Commission sets rates to collect sufficient bond charges without shifting recoverable costs between customers. According to DWR, D.04-12-059 found that § 366.2(d) provides the Commission with the discretion to determine the fair share to be paid by each customer class, and that the Servicing Order anticipates and provides for billing and collection for non-utility bills such as those contemplated in the NBC Agreement.

Discussion

As stated above, the authorization granted by Res. E-3999 and Res. E-4064 to enter into bilateral agreements was 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 procedures specified in Schedule E-NMDL and other IOU's comparable tariff. Res. E-3999 and Res. E-4064 do not explicitly state whether IOUs may agree to reduce the amount of NBCs obligations.

However, in connection with notice to MDL consumer requirements,
Res. E-4064 orders that:

"SCE and PG&E shall revise their tariffs to state that if at the time the consumer notice is due, an IOU has entered into, or agreed to enter into, bilateral discussions with a POU or a POU customer, then the notice requirement for the new MDL consumer(s) taking service from that POU may be suspended until such time as the IOU and POU, or POU customer, reach agreement on the CRS and other NBC obligations, or the IOU determines that a bilateral agreement will not be feasible. If a bilateral agreement is reached that resolves the CRS and other NBC obligations, then the consumer notice requirement is extinguished. If the CRS and other NBC obligations are not resolved through bilateral negotiations, then the IOU shall send the consumer notices required in this subparagraph within
15 days of concluding such bilateral negotiations."²⁰

Thus, Res. E-4064 anticipates the possibility that bilateral agreements could address and resolve NBC obligations.

D.09-08-015 approved the application of PG&E and the Power and Water Resources Pooling Authority (PWRPA)²¹ for a nonbypassable charge agreement between PG&E and PWRPA that provides for a lump-sum payment by PWRPA on behalf of its customers that owe NBCs under PG&E's Electric Rate Schedule E-NWDL.²² Although not designated a "bilateral agreement," as defined by Res. E-4064, the PG&E/PWRPA agreement approved by D.09-08-015 is similar to the NBC Agreement in that it requires PWRPA to pay an agreed-upon amount to resolve past, present, and future NBC obligations for the New Western Area Power Administration Departing Load (NWDL) customers of PWRPA.

Because the negotiations leading to the PG&E/PWRPA agreement provides that content of discussions leading to the agreement are confidential, it is not known how much of the tariffed NBCs obligations were reduced, if at all, under the PG&E/PWRPA agreement. However, the PG&E/PWRPA agreement states that the estimate upon which the agreed-upon settlement is based is reasonable, binding, and not affected or altered if actual charges are different than those reflected in the binding estimate.

D.09-08-015 concluded that the PG&E/PWRPA agreement was reasonable, consistent with law, and in the public interest.²³ D.09-08-015 further concluded that the PG&E/PWRPA agreement fully satisfied the NWDL charge obligations of PWRPA's NWDL customers, and that PG&E has no right to seek further payment or pursue any claim against NWDL customers for charges under Schedule E-NWDL.²⁴ Thus, the Commission has previously approved an agreement that resolves past, present, and future NBC obligations by payment of amounts that may differ from tariffed charges, that relieves an IOU of its obligations to bill or collect NBCs, and that releases the departing load customers of a POU from liability for the payment of NBCs.

We conclude that PG&E and the Districts may enter into the NBC Agreement to resolve NBC obligations, including reducing the amount of NBCs payable by NMDL Customers served by the Districts, releasing those NMDL Customers from liability for NBC obligations, and relieving PG&E of its obligations to bill and/or collect NBCs. However, as discussed above, the NBC Agreement must be reviewed and approved by the Commission in an application.

¹⁹ The DWR Rate Agreement requires the Commission to establish bond charges and power charges sufficient to cover DWR's revenue requirements to pay its power costs and bond obligations, respectively.

²⁰ Ordering Paragraph (OP) No. 1(n). Emphasis added. Res. E-3999 contains similar language at OP No. 1(d).

²¹ PWRPA operates as a local publicly-owned electric utility, as defined by Pub. Util. Code § 9604(d), and provides electric service to its end-use customers under a master rate and service agreement.

²² Schedule E-NWDL applies to New Western Area Power Administration (WAPA) Departing Load.

²³ Conclusion of Law No. 1.

²⁴ Conclusion of Law No. 3.