6.4. May the Commission Approve an Agreement wherein neither the Districts nor the NMDL Customers Served by the Districts will Pay any New Generation or Distribution Related NBCs that may be Established?

Section II.H of the NBC Agreement addresses NBCs that do not currently exist but which may be established in the future. Section II.H exempts NMDL Customers served by the Districts from those future generation or distribution related NBCs, even if the Commission or the Legislature directs PG&E to collect such future NBCs from NMDL Customers served by the Districts.

Section II.H of the NBC Agreement states, in part:

" . . . if PG&E proposes, or if PG&E is authorized or directed to bill and collect, any new nonbypassable charges related to (a) generation sources in any respect, including without limitation the costs of acquiring the sources or the output of the sources, the costs of refinancing the sources or contracts for the output of the sources, the costs of retiring or laying off the sources or terminating or laying off contracts for the output of the sources, or the costs of renegotiating or assigning contracts for the output of the resources, or
(b) distribution facilities or assets, such charges shall not apply to the Districts' NMDL Customers."

The February 26 Ruling sought comments on whether the Commission may approve an agreement wherein neither the Districts nor the NMDL Customers served by the Districts will pay any new NBCs that may be established in the future that would otherwise apply to NMDL Customers.

Applicants assert that NBCs were established to recover costs from customers only if costs were incurred in order to meet the needs of such customers (i.e., on a cost causation basis). Applicants state that PG&E does not intend to incur any costs in anticipation of serving the NMDL customers covered by the NBC Agreement, and therefore, it is unlikely that the Legislature or Commission could lawfully impose new NBCs on such customers. Applicants point to D.08-09-012 as an example of where the Commission exempted certain customers from future NBCs after determining that MDL and customer generation departing load (CGDL) customers should not pay any NBCs related to new generation resources that were not procured on their behalf.

D.08-09-012 did not exempt MDL and CGDL customers from future NBCs that may be incurred on their behalf. Instead, D.08-09-012 determined that MDL and CGDL customers should not pay any NBCs related to new generation resources that were not procured on their behalf. We determined that no resources were procured on behalf of CGDL customers, and, therefore, their fair share is "zero."

Applicants' assertion that it is unlikely that the Legislature or Commission could lawfully seek to impose new NBCs on such customers is insufficient to conclude that there will not be a situation in the future where the Legislature or Commission may find it necessary to establish new generation or distribution related NBCs. As such, to the extent that PG&E might in the future be directed to bill and collect, any new NBCs related to generation sources, Section II.H of the NBC Agreement is not consistent with the law or in the public interest because it may inappropriately bind the Commission.

However, we do not object to PG&E agreeing that it will not impose on NMDL customers served by the Districts any new generation or distribution-related NBCs that PG&E proposes and is authorized, but not required or directed, to bill and collect. Therefore, Section II.H of the NBC Agreement should be modified as follows:

"The Parties agree that if PG&E proposes, or if PG&E and is authorized or directed to bill and collect, any new nonbypassable charges related to (a) generation sources in any respect, including without limitation the costs of acquiring the sources or the output of the sources, the costs of refinancing the sources or contracts for the output of the sources, the costs of retiring or laying off the sources or terminating or laying off contracts for the output of the sources, or the costs of renegotiating or assigning contracts for the output of the resources, or (b) distribution facilities or assets, such charges shall not apply to the Districts' NMDL Customers, except as may be required by the Commission or the Legislature."³⁷

We find Section II.H of the NBC Agreement, as modified, to be reasonable.

In comments on the proposed decision, Applicants state that Section II.H is a material term that provides certainty for the parties, and should not be modified.³⁸ Applicants state that the Districts retain the right to terminate the NBC Agreement if the Districts determine that the uncertainty created by the modification to Section II.H is unacceptable.

According to Applicants, if the Districts reject the NBC Agreement as modified, PG&E will be required to resume billing the NMDL Customers served by the Districts, including the billings suspended pursuant to PG&E's motion for authority to suspend billing granted by the August 21, 2009 ruling. Applicants contend that the resumption of billing would result in customer dissatisfaction and confusion, and would further compromise the prospects of collecting any NBCs from the NMDL Customers served by the Districts. Applicants assert that such an outcome is not in the public interest. Applicants do not allege that the modification results in any factual, legal or technical error.

As stated above, according to Applicants, PG&E does not intend to incur any costs in anticipation of serving the NMDL customers covered by the NBC Agreement, and it is unlikely that the Legislature or Commission could lawfully impose new NBCs on such customers. Because Applicants do not anticipate any situation that could result in the establishment of any new NBCs applicable to the NMDL Customers served by the Districts, Applicants' concern about the uncertainty resulting from the modification of Section II.H is unwarranted.

Kurt Danziger (Danziger), on behalf of the Publicly Owned Utility Customer Association, too, objects to the modification to Section II.H because, according to Danziger, it leaves open the possibility of future disputes concerning new NBCs.³⁹ Danziger states that the NMDL customers served by the Districts need closure on the issues regarding current and future NBCs, but does not contend that the modification results in any factual, legal or technical error.

³⁷ Deleted text is shown in strikethrough font and inserted text is underlined.

³⁸ Comments of Pacific Gas and Electric Company, Merced Irrigation District, and Modesto Irrigation District on Proposed Decision of ALJ Smith, November 9, 2010.

³⁹ Kurt Danziger Letter Regarding Proposed Decision in A.09-06-023, November 8, 2010.